fresh squeeze- banks tighten consumer loan standards
The Federal Reserve reports that the nation’s banks have tightened lending standards across the board for all types of loans responding to both delinquencies and a slowing economy. The Fed said that a survey of federal banks revealed, “domestic institutions reported having tightened their lending standards and terms on all major loan categories over the previous three months.” About 75 percent of institutions polled said that they had tightened lending practices on all types of loans, including home mortgages. Bloomberg reported;
“Funds were scarcer for homebuyers and small businesses, credit card loans became tougher to get, and even banks’ best customers were subject to greater scrutiny. Tighter credit may delay any recovery in economic growth, which economists forecast will slow well into next year.”
Bloomberg reports that since the Fed began lowering interest rates last year, rates that banks charge for home loans have actually increased. The Fed has cut its main lending rate by 3.25 percentage points over the past year to 2 percent while banks are charging homeowners 6.52 percent on a 30-year mortgage as of this month. Bloomberg writes;
“Banks may be reluctant to lend against housing collateral that is falling in value. Home prices in 20 U.S. metropolitan areas dropped 15.8 percent in May, the biggest decline since record keeping began in 2001, according to the S&P Case-Shiller Home-Price Index.”
Banks also tightened their lending standards on non-mortgage loans with 60 percent of the polled institutions reporting that they have increased interest rates on credit card loans, up from 30 percent earlier this year.
see story-
Bloomberg : Fed Says Banks Toughen Lending Standards Amid Slump
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