Banks reported increased residential mortgage demand in 2020 Q2 (Chart 1). In the Q1 survey, banks expected a sharp fall in demand in Q2 as a result of the virus outbreak and the containment measures (Chart 2). Demand for first-home mortgages has risen, though less than overall residential mortgage demand. Banks write in their comments that a greater focus on low interest rates has also contributed to higher demand for refinancing and switching banks. Banks' margins on residential mortgage lending have risen somewhat.

Banks also report that there was substantial use of interest-only periods in Q2. A majority respond that approvals of interest-only periods for borrowers that were laid off or unemployed increased considerably at the beginning of the quarter, but that demand declined as many of these borrowers returned to work. Banks further report that the expanded flexibility quota has been used to some extent.

Overall credit demand from non-financial enterprises fell slightly in 2020 Q2, in line with banks' expectations in the Q1 survey (Charts 3 and 4). Banks report that margins on lending to non-financial enterprises rose somewhat in 2020 Q2 (Chart 3). In the period ahead, banks expect a marginal increase in overall credit demand and demand for commercial real estate loans (Chart 4).

Overall credit standards for enterprises were approximately unchanged and are not expected to change ahead (Chart 3). Banks report a slight tightening in some of the factors affecting credit standards, primarily the economic outlook and industry-specific prospects, but to a lesser extent than they expected in Q1. No appreciable change is expected ahead. The use of interest-only periods for enterprises finding it difficult to service their debt increased between 2020 Q1 and Q2, but banks report that the increase slowed in the course of the quarter.

Banks also report that the government loan scheme has made it easier to maintain the supply of credit to enterprises.