Banks stand firm on lending standards despite lower demand

by Adam Smith05 Nov 2013

While rising rates may have eaten into mortgage demand, banks don't appear to be enticing borrowers with easy money.

A new survey from the Federal Reserve has found that nearly 80% of banks have left their credit standards unchanged over the past quarter, in spite of rising rates hurting mortgage demand, The Wall Street Journal has reported. Only 15% of banks said standards had eased slightly.

The survey indicated that "very few banks" relaxed minimum required down payments or credit scores, or lowered fees. Though 40% of banks saw a lower volume of overall mortgage applications and 90% said refinancing applications had dropped of "substantially", lenders put their efforts into increased marketing plans and reduced loan processing times, The Wall Street Journal said.

Banks were fairly evenly split on whether they expect mortgage loan activity to pick up in the next 12 months. Thirty-eight percent said they expected an increase, while around a third said volume would stay the same and a third saidd it would decrease.


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