U.S. banks continued to tighten standards and terms over the past three months on all major types of loans to individuals or households during the third quarter, according to a senior loan officer opinion survey on bank lending practices released yesterday by the Federal Reserve. The percentage of banks that tightened standards and terms for most loan categories, however, continued to decline from the peaks reached late last year.
Some 15% of survey respondents reported tightening standards for credit card loans to individuals or households, down from the 35% that reported doing so in the previous quarter's survey and the smallest net percentage reported since April 2008. Between 30% and 40% of banks continued to report tightening various terms and conditions on credit card loans, including credit limits, interest rate spreads, minimum required credit scores and their willingness to grant loans to customers who do not meet credit-scoring thresholds.
Approximately 15% of banks, on net, reported having tightened standards on consumer loans other than credit card loans during the third quarter, down from the 35% that reported having done so in the previous quarter and the smallest net percentage of tightening recorded since January 2008. With the exception of interest rate spreads, which nearly 35% of banks reported having widened, reports of tighter terms on other consumer loans were also less prevalent. For consumer loans of all types, 25% of banks reported weaker demand, roughly the same as in the previous quarter.
Approximately 25% of banks, on net, reported that they had tightened standards on prime residential real estate loans over the past three months, which is slightly higher than during the second quarter, but is still significantly below the peak of 75% that was reported in July of last year.
For the third consecutive quarter, banks reported that demand for prime residential real estate loans strengthened. Some 30% of banks reported tightening standards on nontraditional mortgage loans, which represents a decline of about 15 percentage points from the previous quarter.