Blog Post
Data Drop: European mid-market margins edge up despite increasing lender competition
European mid-market direct lending margins have seen consistent compression over recent years but recorded a slight increase in the second quarter of 2026, reaching an average of 553bps over reference rates, up from 542bps in the first quarter, according to Octus data. This resilience in pricing coincides with a cautious approach to leverage, which decreased to an average of 3.8x in Q2 2026, down from a high of 4.3x in Q3 2024.
Despite stricter risk parameters, deal flow increased, with 197 closed transactions representing a 14% rise quarter-on-quarter and a 13% rise year-on-year.
Market activity is being driven by new capital deployment, as both private credit funds and commercial banks compete for market share. Recent demand has focused on upcoming refinancings and expanding capital requirements in the European defense and industrial sectors.
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