Now is a good time for consumers to look for a loan. As competition grows in the financial sector, new research results show that many banks are floating in cash and lowering the bar on lending standards.
In terms of loans to homeowners, banks have lowered standards for most categories of residential real estate (LHE) loans and reported an increase in demand for most types of renewable energy loans in the second quarter. Federal Reserve System July 2021 Senior Loan Officer Opinion Survey on Bank Lending Practice Banks shows that banks have also lowered standards and reported an increase in demand for other major categories of consumer loans, such as credit card loans and car loans.
Impact on lending to residential real estate
Digging deeper into what this means for the consumer, survey results show that banks have eased their lending standards for most mortgage loan categories and for revolving home equity credit lines (HELOCs).
“The two exceptions were for government-funded mortgages (GSEs) – for which the standards have generally remained unchanged – and for subprime mortgages, which few banks have reported as a source,” Fed officials said.
The Federal Reserve says that “giant loans” – the stricter form of loans when conventional mortgages are not enough – have loosened standards particularly severely.
And what about consumer lending?
In the second quarter of 2021, a “significant net share” of banks (more than 20% and less than 50%) reportedly softened its stance on credit card loans. At the same time, a small number of banks (more than 10% and less than or equal to 20%) have lowered the standards for car loans and other consumer loans. A significant number of banks have also increased their credit limits on credit card accounts.
After all, analysts say this is not a historical event destroying the world. Banks are simply easing their lending standards closer to what they were in the pre-2019 pandemic. However, consumers will undoubtedly appreciate the increased indulgence.
“This is clearly a sign of confidence in the US economy, especially after last year’s recession,” he said. wrote Bank of America analysts in a research note.