CU Loan Growth Dips to Lowest Rate in at Least Four Years
Weaker auto lending is the main cause for the decline, while real estate lending remains steady.
Credit union loan growth slowed in February slowed to its lowest rate in at least four years because of weakness in automotive lending.
CUNA’s Monthly Credit Union Estimates show the nation’s 5,609 credit unions held $1.07 trillion in total loans as of Jan. 31, up 8.6% from a year earlier. From September 2014 to December 2017, loan growth measured over 12 months grew in a range of 10% to 10.9%. Last year’s range was 9.1% to 9.9%.
Car loans account for 35% of the credit union portfolio and the 12-month growth rates are still higher than those for real estate.
However, the gap has been narrowing. For the 12 months ending in February, total car loans rose 9.6% to $374.4 billion, while real estate loans rose 8.4% to $525.2 billion.
Measured from Jan. 31 to Feb. 28, the portfolio value of total loans actually fell 0.1%, the first month-to-month drop in at least four years. New car loans and second liens both fell 0.3% and accounted for most of the $1.2 billion drop.
“Things just keep getting tougher for new-car shoppers,” said Jessica Caldwell, executive director of industry analysis. “Interest rates have crept up every month so far this year, and new vehicle prices continue to hover near record highs. We’re on the cusp of what could be a pretty dramatic shift in the market, simply because a big chunk of buyers are getting priced out.”
Edmunds found an increasing number of car buyers are being pushed into higher financing brackets. For example, shoppers receiving interest rates topping 10% made up 14.1% of buyers in March, the highest level since February 2008.
“It’s pretty alarming to see that a sizable segment of new-car shoppers are financing cars at rates that we’d normally associate with used vehicle purchases,” Caldwell said.
Pressure for higher rates is easing with the Fed pause on rate hikes and the approach of the summer sell-down season and its traditional incentives. “But without automakers stepping in to offer a reprieve,” she said, “interest rates around 6% are likely the new normal.”
Meanwhile, CUNA found credit union membership growth was also slower, rising 0.2% in the month and 3.8% over 12 months to reach 119 million in February.
For the 12 months ending Feb. 28, CUNA also estimated:
- Assets grew 6.6% to $1.51 trillion.
- Savings grew 6.3% to $1.27 trillion.
- Capital grew 9.7% to $164.3 billion.
- New auto loans rose 11% to $149.8 billion.
- Used auto loans rose 8.6% to $224.6 billion.
- Unsecured loans rose 6.5% to $104.8 billion.
- Fixed-rate first mortgages rose 9% to $312.4 billion.
- Adjustable-rate first mortgages rose 6.8% to $121.9 billion.
- Second mortgages rose 12.3% to $33.2 billion.
- Home equity lines of credit rose 6.7% to $57.8 billion.
- All other loans rose 6.9% to $64.2 billion.