The latest survey from the Federal Reserve found that some banks are in fact starting to loosen their almost impossibly high lending standards as the economy starts to pick up.
“The April survey indicated that, on net, bank lending standards and terms generally had eased somewhat further during the first quarter of this year,” the Fed wrote in its quarterly survey of senior loan officers.
The impetus for this easing may have been an improvement in borrower credit-worthiness. The report found that 55 percent of domestic banks saw better credit quality among their large and middle-sized loan applicants. Thirty-five percent said the small-loan applicants had better credit profiles.
The loosening of loan requirements was likely also a result of more competition and greater demand for certain types of loans, exactly the situation needed to get banks interested in lending again.
“Several large banks eased lending policies on credit card and auto loans, and the net fraction of banks that reported having become more willing to make consumer installment loans rose to its highest level since the first half of 1994,” the Fed said in the report.
Roughly one-fourth of banks surveyed said they saw an increase in demand for auto loans in the past four months, and many banks experienced a growing demand for commercial and industrial loans, as well as for commercial real estate loans.
“Clearly, we are seeing a turn in the cycle,” said Mark Vitner, senior economist for Wells Fargo Securities LLC in Charlotte,North Carolina, as quoted in a Bloomberg article. “Commercial lending has picked up as businesses have repaired their balance sheets ahead of households and the public sector. We are seeing some improvement in the household sector as well.”
The lending categories that did not seem to be improving, demand-wise, were residential mortgage, credit card and other consumer loans, as individual borrowers have yet to regain a sense of security about employment and the broader economy.
Similar Posts:
- Americans Are Getting Fiscally Fit, and It Shows
- Q1 Auto Loans Beat ‘Cash for Clunkers’ Results
- US Consumers Borrow More In February
- Car Loan Rates Are The Lowest In Decades
- Americans Now Have Less Debt and More Savings than in 2008
