Fed Survey: Stronger Loan Demand Hints at Increased GDP
Aug 5th, 2015 @ 8:09 PM by Amber Nelson
In its latest survey, the Federal Reserve found that banks are seeing an increase in demand for commercial and consumer loan, a sign that U.S. economic growth may pick up as we move toward 2016.
The Fed’s quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices is designed to uncover trends in demand and availability of credit in the U.S. lending markets. Those trends often predict the direction and speed of the country’s GDP.
The most recent survey – covering the 2015 second quarter – revealed a “modest to moderate” rise in demand for commercial and industrial loans as well as commercial real estate loans. Lenders that saw more applicants in the second quarter reported that customers were looking for financing for things like accounts receivable, mergers or acquisitions, inventories or equipment and plant investments. The increase in demand for business capital is a good indication that entrepreneurs are feeling more confident about the general economy. However, even as demand grew, lenders loan standards were little changed in the second quarter.
Demand also rose by a “moderate to large” margin for most categories of home-purchase loans, particularly home equity lines of credit (HELOC). Rising mortgage interest rates have lit a fire under many buyers and those seeking to refinance to take action before rates go any higher. And for those with decent credit histories, getting those loans was slightly easier as mortgage lenders somewhat loosened mortgage underwriting standards during the last quarter, but those with tarnished credit did not get to see such easing. In fact, “the vast majority of banks continued to report that they do not extend home-purchase loans to subprime borrowers,” the report stated. Those applying for government-backed loans like FHA mortgages did not feel the easing effects either.
Additionally, lenders saw a greater demand for auto and credit card loans, but they did not change their lending standards for those type of loans during the second quarter.
The Fed survey includes the responses from 71 domestic banks and 23 U.S. branches and agencies of foreign banks.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.