US loan officers report tighter lending standards

The Fed’s Senior Loan Officer Opinion Survey for July is consistent with tighter financial conditions in the second quarter 2023. Loan officers report tighter standards for lending and weaker demand for commercial and industrial loans and for all types of commercial real estate lending.

Much the same is true for lending to households in the second quarter. Standards were tighter for all types of residential real estate loans and for home equity lines of credit, and for all types of consumer loans. Demand was down for all categories of residential real estate loans, for auto loans, and other types of consumer loans except credit cards where demand was about the same. Bank willingness to lend to households remained weak.

For residential real estate loans, the survey said, “[S]ignificant net shares of banks reported weaker demand for HELOCs and all types of RRE loans except for subprime mortgage loans, which saw a modest net share of banks reporting weaker demand.”

In special questions for this survey, banks expect to further tighten standards for all types of loans. The survey said, “Banks most frequently cited a less favorable or more uncertain economic outlook and expected deterioration in collateral values and the credit quality of loans as reasons for expecting to tighten lending standards further over the remainder of 2023.”