Key Points
WASHINGTON, Nov 6 (Reuters) - Banks tightened lending standards for U.S. businesses and households in the third quarter, but the pace of change appeared to ease, and demand for loans fell broadly in a sign of the impact higher interest rates are having on the economy, the Federal Reserve reported on Monday.. The tightening of standards for business loans applied to firms of all sizes, the U.S. central bank said in its latest survey of senior bank lending officers, while consumers faced tighter credit for home and home equity loans, credit cards, and tougher terms on auto loans...
Demand for loans fell broadly, with 60% of banks citing moderately or substantially weaker demand for home mortgages in the third quarter, up significantly from 43% in the second quarter, as the Fed's aggressive rate increases since March of 2022 continued to bite on the residential housing industry...
The detailed responses of the survey, fielded quarterly by the Fed and part of the data presented by staff to policymakers, did suggest, however, that the pace of credit tightening may be easing as the central bank's rate increases reach a likely plateau in the nearly 20-month-old tightening cycle...
Asked about the reasons for why standards may have shifted, bankers were also less likely in the third quarter to cite concerns about the overall economy or their own banks' financial position, and more likely to point to lower risk tolerance and the ability to resell loans in the secondary market...
"The survey continued to show tightening lending standards and decreases in demand across the major reported loan types that look broadly consistent with an economy that should be slowing," said Daniel Silver, an economist at J.P. Morgan...
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