The rebound in the second quarter (16%) followed a small decline in the previous quarter (-3%), but was weaker than banks had expected (22%).

Among the four largest euro area economies, German, Spanish and Italian banks recorded net increases, while French banks recorded unchanged demand for home loans.

"The improved housing market outlook was the main factor increasing demand for home purchase loans," the ECB explains, highlighting the development in Germany, where "relatively strong" price falls recorded have improved housing affordability.