The Credit Crunch Lives: Banks Still Tightening Real Estate and Consumer Lending

Let’s start with the good news: Less than half the banks surveyed tightened their business lending standards in the first quarter of this year, according to the Fed’s quarterly survey of senior loan officers at banks. This would be the first time since January 2008 that the majority of loan officers did not report tightening credit standards during the quarter.

The way to think about this is as a second-derivative type thing: the credit markets continue to tighten, but the pace of the tightening is slowing down. This is a good thing. Before we ever to get to a point where the credit markets loosen, we’ve got to slow and then stop the tightening.

Unfortunately, the real estate lending and consumer lending markets keep setting record paces for tightening.

More Banks Tightening Residential Real Estate Lending.
In the April survey, somewhat larger fractions of domestic respondents than in the January survey reported having tightened their lending standards on prime and nontraditional residential mortgages.

Consumer Lending Is Also Getting Tighter Faster.
Large percentages of domestic banks again reported a tightening of standards and terms on both credit card loans and other consumer loans over the previous three months. Nearly 60 per cent of respondents indicated that they had tightened lending standards on credit card loans, about the same proportion as in the January survey. About 50 per cent of respondents, down from 60 per cent in the January survey, reported tightening standards on other consumer loans.

Commercial Real Estate Lending Is Still Getting Tighter, But More Slowly.
About 65 per cent of domestic banks, on net, reported tightening their lending standards on commercial real estate loans over the previous three months, compared with about 80 per cent in the January survey.

 

 

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