Experts expect consumer demand for credit to continue growing during the next six months, driven mostly by those in the 30- to 39-year-old age group. The quarterly survey of bank risk professionals conducted for FICO by the Professional Risk Managers’ International Association (PRMIA) also showed expectations for increased interest rates.
The groups have conducted the survey since the first quarter of 2010, asking banking professionals to assess the potential impact of current events and share their predictions of credit risk for the coming six months. This most recent survey, released this month, was conducted prior to the partial government shutdown, so the economic fall-out of ongoing legislative conflict is not reflected in the responses.
Overall, bankers seemed somewhat optimistic. A majority expect delinquencies to hold stead as demand increases, with 46% saying requests for credit-line increases will go up. Additionally, 53% expect credit card balances to rise.
“The theme of the economic recovery seems to be ‘slow and steady,’” said Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. He assessed the survey in a news release. “Both consumer spending and income ticked up slightly during the summer. I’m sure that contributed to the feeling among our respondents that consumer borrowing is poised to increase. It remains to be seen if the government shutdown causes consumers to tighten their purse strings.”
Perhaps the most striking findings come in the categories of interest rates and student loan delinquencies.
Bankers who expect interest rates to decrease accounted for less than 1% of the responses, the lowest in the survey’s history. A vast majority, 72%, expect interest rates to rise, with 61.6% predicting mortgage rates will rise to 6% in the next three years.
Notably, the outlook for student loan delinquencies was poor, with 49.1% expecting that rate to rise, as it has during the past several years. According to a news release about the study, it is the eighth quarter in a row in which student loan delinquency has been a significant concern.