Banks appear more willing to lend money, especially for consumer installment loans, where willingness is at the highest level since early 1994, according to the Federal Reserve’s Senior Loan Officer Opinion Survey on Bank Lending Practices.
In the home loan arena, the report noted, “On net, standards on prime closed-end residential real estate loans and home equity lines of credit were about unchanged during the first quarter of 2011.”
Slackening Home Loan Demand
Lenders appear more cautious on other home loans.
“As in the previous two surveys,” the report noted, “about 10 percent of banks, on net, tightened standards on nontraditional mortgages. The tightening of standards on nontraditional mortgages primarily reflected changes at smaller banks; all larger banks left those standards about unchanged.
“Moderate net fractions of banks reported weakening demand for both prime and nontraditional closed-end loans as well as for home equity lines of credit. Demand for closed-end loans has now declined for three consecutive quarters. “
Looser Commercial, Industrial Standards
The report, released in May, said banks have continued to ease standards and terms for commercial and industrial loans.
“The majority of respondents that had eased standards and terms on C&I loans cited increased competition from other banks and nonbank lenders as the most important reason for the easing,” according to the report. “Some banks that had eased standards and terms also pointed to a more favorable or less uncertain economic outlook.”
Easier Credit, Soft Demand
In the credit card industry, banks appear eager to approve credit card applications for new customers, but consumers do not appear to be as eager to apply.
About 20 percent of banks reported having eased standards for approving credit card applications. However, consumer demand for credit cards remained flat, so only a small fraction of banks reported an increase in the number of credit card applications over the prior three months.
Among the findings:
- 20.5 percent of all banks say lending standards for approving credit card applications have eased somewhat. That’s more than twice the percentage that relaxed standards in the fourth quarter of 2010.
- The outlook was brightest at large banks, where 34.8 percent say lending standards for approving credit card applications have been eased.
- Consumer demand for credit cards showed no net change, with 8.3 percent of banks reporting stronger demand for credit card loans and 11.1 percent of banks reporting weaker demand.
- 10 percent of large banks reported having eased the minimum required credit score for loan application approval.
The latest quarterly Senior Loan Officer Opinion Survey of 55 domestic banks and 22 U.S. branches and agencies of foreign banks was conducted in April 2011.
Steve Stanek ([email protected]) is a research fellow at The Heartland Institute and managing editor of Finance, Insurance & Real Estate Policy News.
Federal Reserve Senior Loan Officer Opinion Survey for first quarter 2011: http://www.federalreserve.gov/boarddocs/snloansurvey/201104/fullreport.pdf