Personal Finance

Fed Says Credit Crunch Continues to Ease

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Demand for new lines of credit among businesses increased significantly in the third quarter, and banks continued to ease lending standards across many different types of loans, both of which may indicate companies feel the economy is improving.

About 45 percent of bank credit officers say demand for commercial real estate loans increased “notably” in the third quarter of the year, and when it comes to consumer loans, there was a slight uptick as well, according to the latest Senior Loan Officer Opinion Survey on Bank Lending Practices issued by the Federal Reserve Board. Meanwhile, a greater number of consumer loans became more widely available from lenders.

In all, 12.7 percent of lenders said they are now more willing to extend consumer loans in general than they were three months ago, the report said. Somewhat commensurate with that, 11.1 percent of those polled said their standards for credit card lending have eased somewhat in the last six months, including 19.2 percent of large banks in the survey. Smaller banks were more cautious, with just one of the 28 polled responding similarly.

When it comes to auto loans, just 9.7 percent of all banks said they were more willing to ease standards somewhat over the last three months, and this, too, was driven by four of 29 large banks, compared with just two of 33 smaller institutions, the report said. When it comes to non-credit card or auto financing, though, it was actually small banks that budged at all. While just 3.1 percent of banks polled – two of 64 – said they eased standards on that type of lending, both were smaller participants.

Meanwhile, credit cards’ limits increased somewhat for four major banks over the last three months, and one small bank said that it eased minimum payment requirements considerably, the report said. Only one bank out of 45 said it eased its minimum credit score requirements, and did so only somewhat. At the same time, eight of 47 banks said demand for new credit cards was moderately stronger, and 13 of 59 said the same for auto loans.

Consumers may still approach borrowing with some amount of caution as a result of financial issues encountered during the recession. However, increased interest may indicate that the old habits are making a bit of a comeback.

Image: Patrick Feller, via Flickr

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