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Data & Analysis

Financial Services - July 2010

According to the weekly Primary Mortgage Market Survey conducted by Freddie Mac, 30-year and 15-year fixed mortgage rates hit record lows for the week ending July 23.

  • The rate for 30-year fixed-rate mortgages for the week ending July 23, 2010, averaged 4.56 percent, 1 basis point lower than a week earlier. At this time last year, the rate averaged 5.20 percent. The current rate is the lowest since Freddie Mac began tracking it in April 1971.
  • The rate for 15-year fixed-rate mortgages declined to 4.03 percent, down 3 basis points from the previous week. At this time last year, the rate averaged 4.68 percent. The current rate is the lowest since Freddie Mac began tracking it in August 1991.

In its weekly survey of mortgage bankers, commercial banks, and thrifts for the week ending July 16, the Mortgage Bankers Association reported mortgage refinance applications and purchase applications increased over the previous week.

  • The seasonally adjusted market composite index of mortgage applications, which includes purchases and refinances, increased 7.6 percent for the week ending July 16, 2010.
  • The seasonally adjusted refinance index increased 8.6 percent from the previous week and is at its highest level since May 15, 2009. The refinance share of mortgage activity currently represents 79.4 percent of total application volume.
  • Purchase applications increased slightly from one week earlier.

Federal Deposit Insurance Corporation press releases list two Sixth Federal Reserve District banks among the seven closed by regulators on July 23; the District total now stands at 30 for 2010.

  • State regulators closed Sterling Bank (Lantana, FL) and Crescent Bank and Trust Company (Jasper, GA) on Friday, July 23. Banks in South Carolina, Kansas, Minnesota, Nevada, and Oregon were also closed, bringing the nationwide total of failed FDIC-insured institutions to 103 for the year.
  • Florida leads the nation with 18 bank failures during 2010, followed by Illinois (12) and Georgia (10).
  • District failures are slightly ahead of the pace set last year, when a total of 42 District banks were closed.

The latest Senior Loan Officer Opinion Survey from the Federal Reserve Board of Governors (covering Q1 2010 activity) marked the first time since 2006 that banks reportedly eased standards on C&I loans in two consecutive quarters.

  • Large domestic banks were primarily responsible for easing standards to larger commercial and industrial (C&I) borrowers, trimming pricing terms, including the cost of credit lines and the spreads of loan rates over their cost of funds.
  • None of the smaller banks reported easing their standards on C&I loans to larger firms. Most domestic banks reported little change in standards on C&I loans to smaller firms.
  • According to the survey, the three factors exerting the greatest influence on C&I lending policies were competitive pressures, the economic outlook, and tolerance for risk in the C&I loan market.

C&I loan demand weakened further.

  • Weakening of loan demand was concentrated at smaller domestic banks while large domestic banks reported little net change in demand.
  • Most banks that reported weaker demand cited borrowers’ reduced need to finance plant and equipment investment; the large majority indicated that demand for inventory and accounts receivable financing declined.
  • Banks that reported increased demand for C&I loans cited an increased need to finance inventories and accounts receivables and a pickup in mergers and acquisitions.

Most banks reported essentially no change in their standards for prime and nontraditional mortgage loans.

Demand for prime mortgages and home equity loans weakened further.

A significant number of domestic banks continued to report tightening terms on commercial real estate (CRE) loans.

Domestic banks reported weaker demand for CRE loans.

  • The net fraction of banks reporting weaker demand moved below 10 percent for the first time since the recent financial crisis began.


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