Loan standards for multiple types of loans were eased during the third quarter, according to results of a Federal Reserve survey released Monday, as demand for commercial loans picked up – but demand for residential real estate loans backed off.
According to the Fed’s October 2021 Senior Loan Officer Opinion Survey on Bank Lending Practices, easier standards for commercial and industrial (C&I) loans to large and middle-market firms were reported over the third quarter. Similar easier standards were reported for C&I loans to small firms, the survey showed.
The easier standards came, however, in the face stronger demand for the C&I loans from the larger firms. Demand for the loans by the smaller firms was unchanged from the previous quarter.
“Banks also reported stronger demand for multifamily loans and for loans secured by nonfarm nonresidential properties, while demand for construction and land development loans remained basically unchanged,” the Fed said the survey results showed.
Banks eased standards across most categories of residential real estate (RRE) loans, on net, the Fed said. However, there was weaker demand for most types of RRE loans over the third quarter, according to the survey results.
Standards were eased across all three consumer loan categories – credit card loans, auto loans, and other consumer loans – while reports on demand for consumer loans were mixed, the survey results showed, according to the Fed.
A set of special questions about the current level of demand relative to pre-pandemic levels (defined as the end of 2019) for C&I and credit card loans, as well as banks’ outlook for demand for such loans over the next six months, was also included in the survey. The Fed said that on balance, banks reported weaker levels of demand for all queried C&I and credit card loan categories compared with the end of 2019; and that they expect stronger demand for both C&I and credit card loans over the next six months.