U.S. banks tightened standards for credit-card loans during the second quarter while reporting weaker demand for residential mortgages and auto loans, according to the Federal Reserve’s July lending survey.
Conditions were different for businesses. Standards for commercial and industrial loans were basically unchanged, while a moderate net share of banks reported stronger demand from large and middle-market firms. Demand from small firms was little changed.
Banks also narrowed loan-rate spreads and eased selected credit-line terms for larger firms. Respondents that reported easier terms most often cited stronger competition from banks or nonbanks, followed by factors including secondary-market liquidity and greater risk tolerance.
Commercial real-estate standards eased for nonfarm nonresidential and multifamily properties, but construction and land-development standards were little changed. Demand weakened for construction and land-development loans and was mixed across bank sizes in other property categories.
Household credit remained more restrictive. Banks left most mortgage-approval standards unchanged and eased jumbo standards modestly, yet demand weakened across most home-purchase categories. Home-equity line demand strengthened.
Credit-card standards tightened modestly, auto standards were little changed and auto-loan demand weakened. The survey describes the direction reported by lenders; it does not measure the number or value of loans ultimately made.
In special questions, banks compared current standards with the midpoint of their own ranges since 2005. They placed most categories at the tighter end, except commercial and industrial loans, which generally sat on the easier side of historical midpoints.
The survey received responses from 56 domestic banks and 18 U.S. branches and agencies of foreign banks. The Fed uses net shares and qualitative bands: a result within five percentage points is ‘basically unchanged,’ while stronger terms such as modest, moderate or significant cover successively larger ranges.
The results point to a divided credit market rather than a uniform tightening cycle. Larger businesses reported firmer demand and some easier terms, while households faced softer borrowing demand and historically tight standards across several consumer categories.