Financial Services - June 2009Data and Analysis
District lending conditions continued to remain tight for both consumers and small businesses during the second quarter of 2009. Contacts continued to cite a lack of commercial loan demand, uncertainty of real estate values, and heightened credit analysis as factors restraining the current lending market.
Freddie Mac Primary Mortgage Market Survey
For the week ending June 19, the 30-year fixed mortgage rate averaged 5.38 percent, a decline of 21 basis points from the previous week, but 56 basis points above the month-earlier rate. At this time last year, the rate averaged 6.42 percent. The Mortgage Bankers Association's weekly survey of mortgage bankers, commercial banks, and thrifts indicated that the volume of total mortgage loan applications and refinance applications increased slightly from the previous week but has fallen significantly from the high levels reached in January and April.
Senior Loan Officer Opinion Survey
The Federal Reserve Board's April 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices (which reflects activity during the first quarter of 2009) showed that demand for loans from businesses and households continued to weaken for nearly all types of loans over the survey period. About 60 percent of domestic banks reported a further weakening of demand for commercial and industrial (C&I) loans over the previous three months, a proportion similar to that reported in the last survey.
Survey results also indicated that the rate of tightening for loans to businesses edged downward for the second consecutive survey. About 40 percent of domestic respondents reported tighter standards on C&I loans to large and midsize firms during the first three months of 2009, and around 42 percent of respondents reported tighter standards on loans to small firms. The average percentage of domestic respondents who reported tighter credit standards on C&I loans fell to about 40 percent compared with nearly 65 percent from the last quarter of 2008. The April survey marks the first time since the January 2008 survey that the proportion of banks reporting tighter standards on C&I loans fell below 50 percent.
The April survey showed a slight tightening for residential real estate lending during the first quarter of 2009. Compared to the January survey, somewhat more respondents reported having tightened their lending standards on prime and nontraditional residential mortgages, with about 50 percent of domestic respondents indicating they had tightened their lending standards on prime mortgages over the past three months. Approximately 65 percent of the 25 banks originating nontraditional mortgage loans during the survey period reported tightening their lending standards on such loans.
About 35 percent of domestic respondents reported stronger demand, on net, for prime residential mortgages over the past three months, a substantial improvement from the 10 percent that reported weaker demand in the January survey.