Banks keep lending standards tight as demand rises
The Fed
WASHINGTON (MarketWatch) — Banks have kept their lending standards fairly
tight while demand for business loans, mortgages and car loans has picked up,
according to a survey released by the Federal Reserve on Monday.
The January senior loan officer survey found that “generally modest” fractions of lenders made it easier to get loans over the last three months. The survey was conducted from officers of 68 domestic banks and 22 foreign ones operating state-side.
Domestic banks reported that standards for both prime and nontraditional mortgages were essentially unchanged over the past three months, the Fed survey said.
The news will reinforce concerns from Federal Reserve and other officials that banks are still keeping a lid on economic growth with their tighter standards that they have maintained after the end of the housing bubble.
The January senior loan officer survey found that “generally modest” fractions of lenders made it easier to get loans over the last three months. The survey was conducted from officers of 68 domestic banks and 22 foreign ones operating state-side.
Domestic banks reported that standards for both prime and nontraditional mortgages were essentially unchanged over the past three months, the Fed survey said.
The news will reinforce concerns from Federal Reserve and other officials that banks are still keeping a lid on economic growth with their tighter standards that they have maintained after the end of the housing bubble.
Separate data shows that the average FICO score, or credit rating, of an
approved mortgage has increased substantially since the credit crunch. The
National Association of Realtors, the trade group for real-estate agents,
frequently laments lending standards they say are overly tight.
With mortgage rates near record lows and house prices on the rise, there’s been a renewed interest from buyers seeking mortgages. That said, outstanding mortgage debt at the end of the third quarter was down by over 10% compared to 2008 levels, according to Fed data.
Standards on auto loans meanwhile eased, while standards for credit cards were little changed, the senior loan officer survey found. And, not surprisingly, demand for auto loans was stronger while credit-card demand was basically unchanged.
On the business side, commercial and industrial lending standards eased somewhat in response to more aggressive competition. There was a moderate increase in demand from businesses — in part to fund bonus payments to employees and dividend payments to investors ahead of anticipated changes to the tax code.
Dividend income rose a whopping $268.2 billion, on an annualized basis, in December, compared with an average of $7.3 billion per month over the year through November, the Commerce Department has reported. See charts of the dividend income jump and other economic indicators.
The Fed’s survey, it should be pointed out, measures relative standards — that is, whether standards are tougher or looser than the previous three months — and not absolute levels, making it difficult to pinpoint just how tight or loose lending standards are.
Meanwhile, a special question found that about 10% of domestic banks had tightened their standards toward banks in Europe, though that’s a smaller increase than in past surveys. About one-third of respondents that reportedly compete with European banks noted an increase in business to some extent, the Fed survey said.
With mortgage rates near record lows and house prices on the rise, there’s been a renewed interest from buyers seeking mortgages. That said, outstanding mortgage debt at the end of the third quarter was down by over 10% compared to 2008 levels, according to Fed data.
Standards on auto loans meanwhile eased, while standards for credit cards were little changed, the senior loan officer survey found. And, not surprisingly, demand for auto loans was stronger while credit-card demand was basically unchanged.
On the business side, commercial and industrial lending standards eased somewhat in response to more aggressive competition. There was a moderate increase in demand from businesses — in part to fund bonus payments to employees and dividend payments to investors ahead of anticipated changes to the tax code.
Dividend income rose a whopping $268.2 billion, on an annualized basis, in December, compared with an average of $7.3 billion per month over the year through November, the Commerce Department has reported. See charts of the dividend income jump and other economic indicators.
The Fed’s survey, it should be pointed out, measures relative standards — that is, whether standards are tougher or looser than the previous three months — and not absolute levels, making it difficult to pinpoint just how tight or loose lending standards are.
Meanwhile, a special question found that about 10% of domestic banks had tightened their standards toward banks in Europe, though that’s a smaller increase than in past surveys. About one-third of respondents that reportedly compete with European banks noted an increase in business to some extent, the Fed survey said.
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