Remember when everyone was berating the banks last year for not lending enough to support the economy? Well perhaps it’s more a function of consumers and companies not wanting loans.
That’s because loan demand remains weak even with easier access from the banks, according to a new Federal Reserve survey:
Banks were more willing to make consumer instalment loans and eased standards on credit-card loans, the central bank said in its quarterly survey of senior loan officers through the middle of October. At the same time, demand for mortgages remained weak, while demand for business lending fell, after having been unchanged in the previous survey.
Borrowers are repairing their household balance sheets, the report showed, with 11.1 per cent of outstanding debts in “some stage of delinquency” compared to 11.6 per cent a year earlier, the New York Fed said.
“Americans are borrowing less and paying off more debt than in the recent past,” Donghoon Lee, a senior economist at the New York Fed, said in a statement. Only part of the reduction can be attributed to defaults and charge-offs, he said. “This change, which we continue to study carefully, can be a result of both tightening credit standards and voluntary changes in saving behaviour.”
This may also explain the Fed’s willingness to continue with its easy monetary policy. The U.S. remains far from an environment of excess liquidity in the real economy, even if money is being theoretically ‘printed’ in the financial economy.