The year 2019 is starting with the same trends that credit unions experienced at the end of last year: loan balances that are rising at a healthy clip, but at rates slower than years past.
CUNA’s Monthly Credit Union Estimates show the nation’s 5,613 credit unions held $1.07 trillion in total loans as of Jan. 31, up 9% from a year earlier. The 12-month gains have been trending down since their last high of 10.9% in July 2017, with slowing in key areas of automobile loans, mortgages and credit cards.
Clouding the picture further was a weak jobs report released Friday.
“February job growth was surprisingly slow as employers added to payrolls at the slowest pace since September 2017,” said NAFCU Chief Economist Curt Long. “One poor report should not set off alarm bells, but given that the labor market is the lynchpin for the entire economy, it does add to existing concerns and raises the stakes for next month’s report.”
The Fed’s G19 Consumer Credit Report Thursday showed that credit unions held $62.1 billion in credit card debt, up 6.9% from a year earlier. Lenders of all types held $1.03 trillion in credit card debt, up 3.3% from a year earlier.
Nationally, new U.S. light vehicle sales are down in the first two months of 2019, as interest rates have risen to 10-year highs.
Credit unions held an estimated $374.8 billion it car loans at the end of January, up 10.2% from January 2018, according to CUNA. New car loans rose 11.4% to $149.9 billion, while loans on used cars rose 9.5% to $224.9 billion.
Edmunds, an automotive data company based in Santa Monica, Calif., reported that auto loan rates in February hit their highest levels since February 2009 as automakers rein in zero-percent and other low interest rate offers.
The average APR on new vehicles was 6.26% in February, up from 5.19% in February 2018, Edmunds said.
Consumers have been responding by making larger down payments. New car down payments rose 6.6% to $4,187 in February from a year earlier, while loan amounts rose 2.4% to $32,071. For used cars, down payments rose 4.1% to $2,638 in February, while loan amounts rose 3% to $21,861.
“Shopping conditions are pretty unfavorable for consumers across the board, and even those with good credit are having trouble finding compelling finance offers,” said Jeremy Acevedo, Edmunds’ manager of industry analysis. “As rising vehicle costs and interest rates continue to compromise affordability, more shoppers might find themselves priced out of the new vehicle market.”
Credit unions will also face challenges as gains in real estate lending have slowed over the past two years. CUNA estimates that total first lien mortgages rose 8.2% over the past 12 months to reach $430.5 billion in January, while second-liens rose 6.5% to $91 billion.
The Mortgage Bankers Association expects purchase originations will rise 4.4% this year for all lenders. They rose 3.6% in 2018 to an estimated $1.19 trillion, down from increases of 19% in 2015, 16.5% in 2016 and 8.7% in 2017.
MBA expects refinance mortgages to fall 14.4% this year, after falling 25.7% to an estimated $458 billion in 2018.
Mortgage rates have been trending down for the last four months. Freddie Mac shows the average 30-year fixed rate mortgage rate was 4.35% at the end of February. It had risen from a low of 3.42% in October 2016 to a high of 4.94% in November 2018.
MBA predicts they will rise to 4.8% by the end of this year, and 4.9% by the third quarter, and 4.9% by the first quarter of 2020.
CUNA reported that total credit union assets were $1.48 trillion as of Jan. 31, up 5.7% from a year ago. Its report also estimated:
- Savings grew 6.2% to $1.24 trillion.
- Capital grew 9.8% to $164.3 billion.
- Members grew 4.2% to 118.9 million.
- Fixed-rate first mortgages rose 7.1% to $305.2 billion.
- Adjustable-rate first mortgages rose 10.9% to $125.3 billion.
- Second mortgages rose 9% to $33.2 billion.
- Home equity lines of credit rose 5.1% to $57.8 billion.