Banks are seeing stronger consumer demand for credit for a range of products, including residential mortgages, auto loans and credit cards, according to a Federal Reserve Board survey of senior loan officers released Monday.
The Senior Loan Officer Opinion Survey — a quarterly survey of senior banks loan officers aimed at gauging market lending standards and demand — noted that substantial majorities of officers surveyed said that, while commercial demand remains flat or moderately improved, consumer demand has picked up in recent months.
"Regarding loans to households, banks reported having eased lending standards for a number of categories of residential mortgage loans over the past three months on net," the report said. "On the demand side, moderate to large net fractions of banks reported stronger demand across most categories of home-purchase loans. Similarly, respondents experienced stronger demand for auto and credit card loans on net."
Banks reported that demand for a wide range of residential mortgages was moderately or substantially stronger from the last survey. A substantial minority of respondents — 43.5% -- reported moderately stronger demand for government-sponsored enterprise-eligible mortgages, while 39% reported moderately stronger demand for government residential mortgages and 26% reported moderate increases in jumbo Qualified Mortgages. Only 24% reported moderately improved demand for QM non-jumbo, non-GSE-eligible loans.
Of those loan officers surveyed, 40% saw a moderate increase in demand for subprime mortgages, though "the vast majority of banks continued to report that they do not extend home-purchase loans to subprime borrowers," the survey said.
Respondents similarly said that consumer demand for other products had inched up, with 23% of loan officers saying that auto loan demand was moderately stronger and 15% saying that non-credit card consumer loan demand had increased moderately. Sixteen percent of respondents noted moderately increased demand in credit card loans, while 12% said demand was moderately weaker.
That increase in demand, while moderate, suggests that pent-up consumer demand may be stirring after years of dormancy following the financial crisis. But lenders said that, despite the growing demand for loans, their offered terms and requirements remained essentially unchanged over the last three months, especially with respect to mortgage lending.
Lending standards for commercial lending, meanwhile, were flat or moderately improved. Only 20% of officers surveyed said that they had eased commercial and industrial underwriting standards for large firms since the previous survey, and 24% said the costs of C&I credit lines had eased somewhat.
Most other C&I lending standards for small and large firms alike remained largely unchanged. Banks, especially large banks, reported narrower loan spreads — that is, offering loans with lower rates of return -- for large C&I projects in recent months, with 51% of large banks reporting narrower spreads and 39% of other banks offering similarly eased terms. Banks reported slightly more muted enthusiasm for similar loans to firms with less than $50 million in sales, however.
Commercial real estate lending remained largely unchanged, the survey said, with most lenders reporting terms and standards remaining unchanged. However, 12.5% of large banks and 37% of smaller banks said they experienced greater demand for land development loans over the last three months, the survey said, and demand for commercially developable land has strengthened to a similar degree.