Is US Consumer Credit Health Continuing to Improve?
In my first post about our latest quarterly US survey of bank risk professionals, I highlighted the optimism around small business lending. That optimism appears to extend to consumer lending.
In fact, this was the second consecutive quarter where a majority of bankers expected delinquency rates to remain flat or decrease on every type of consumer loan, except student loans. With delinquency rates already low on most types of consumer loans, the fact that our respondents expect delinquencies to stay down (or go even lower) is a very positive outlook.
In another hopeful sign, for the second straight quarter, the majority of bankers surveyed expected the supply of credit to satisfy demand for all types of consumer loans.
Two points of concern in the survey were student loan delinquencies and, to a much lesser extent, the supply of new home loans. A majority of respondents (61%) expected delinquencies on student loans to increase. This is the fourth consecutive quarter that respondents have predicted a worsening of student loan delinquencies.
This concern about student loans aligns with recent research where we found that, among all US consumers with student loan debt, the size of that debt increased by 54% between 2005 and 2012. During a time when consumers have been deleveraging, this is startling. It’s hard to see how this trend is sustainable.
As for new mortgage financing, survey results were nearly evenly split, with 51% of respondents expecting an adequate credit supply and 49% expecting supply to fall short of demand. With the housing market showing signs of a recovery in many areas, a limited supply of mortgage financing could hamper sales activity.
View the full report of our survey results.