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US consumers show greater demand for credit this year, rejection rates drop: NY Fed survey

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US consumers showed greater appetite for loans this year — driven by stronger demand for mortgages amid lower rates — and they had an easier time accessing credit when compared to a year earlier, a survey from the New York Federal Reserve showed on Monday. Applications for credit rose slightly this year compared to 2018, and rejection rates declined, according to the New York Fed’s Survey of Consumer Expectations Credit Access Survey.

Applications for any kind of credit rose to 45.8 per cent on average in 2019 from 45.5 per cent in 2018.

Rejection rates dropped to 17.6 per cent in 2019 from 19.9 per cent in 2018. The greater demand for credit was driven by consumers seeking to take advantage of lower borrowing rates to buy homes.

Mortgage loan application rates rose to 7.9 per cent this year from 7.1 per cent in 2018.

That corresponded with a drop in mortgage rates, with the 30-year fixed rate mortgage dropping to 3.73 per cent as of December 13, 0.9 percentage point lower than the same time last year, according to Freddie Mac.

Most of those home buyers had strong credit, with credit scores higher than 680. In contrast, applications for mortgage refinancing loans declined slightly to 8.0 per cent this year from 8.3 per cent in 2018.

Auto loan application rates also dropped to 12.6 per cent this year from 15.5 per cent last year. Overall, consumers who applied for new credit this year had an easier time accessing those loans.

Rejection rates declined for credit cards, mortgages and mortgage refinance applications, the survey found.

The main exception was auto loans, which saw rejection rates rise to an average 7.1 per cent in 2019 from 6.1 per cent in 2018. The New York Fed polls consumers about their credit expectations every four months and publishes one annual release summarising trends from the past year. The study also examines the financial fragility of US households.

The perceived probability of facing a sudden expense of $2,000 in the next month rose to 33.6 per cent in 2019 from 32.9 per cent in 2018.

But consumers also felt more confident in their ability to afford such a bill, with 69.8 per cent of consumers saying they would be able to come up with $2,000, up slightly from 68.6 per cent in 2018.




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