Financial Services - May 2009
District lending conditions remained 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 continued heightened credit analysis as factors restraining the current lending market. Lower mortgage rates have increased the number of mortgage applications for both purchases and refinances.
Freddie Mac Primary Mortgage Market Survey
For the week ending May 15, the 30-year fixed mortgage rate inched upward from a month earlier, climbing 6 basis points to 4.86 percent. At this time last year, the rate averaged 6.01 percent.
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 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 commercial and industrial (C&I) loans to large and midsize firms during the first three months of 2009, and about 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 around 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.
Respondents indicated 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 C&I loans over the previous three months, a proportion similar to that reported in the last survey.
In response to a special question about expectations for delinquencies and charge-offs of existing loans to businesses and households, a large majority of banks reported that they expect credit quality for all types of loans to deteriorate over the year if the economy progresses according to consensus forecasts.