Cars Fall Behind Real Estate in May Loan Growth for CUs

Harder braking on car lending slowed lending progress further for credit unions in May.

CUNA’s Monthly Credit Union Estimates report showed the nation’s 5,550 credit unions held $1.08 trillion in loans May 31, up 6.8% from a year earlier.

That’s down from loan growth of 9.6% for the 12 months that ended May 2018, and rates close to 11% for the previous three years.

“Loan growth is slowing down significantly,” senior economist Jordan van Rijn said. “It’s pretty much the slowest loan growth we’ve seen since 2013 or before.”

CUNA isn’t predicting a recession within the next two years, but van Rijn said economic uncertainties are rising, and with that, the probability of recession next year is rising. And consumers are getting a bit jittery.

One worrying sign is that credit unions saw significant weakness in car loans, which make up about a third of the movement’s portfolio, van Rijn said.

Car lending, which has led growth in the last few years, lagged in May with total car loans growing 5.8% to $375.2 billion.

Loans on new cars rose 6% to $148.1 billion, while used-car loans rose 5.8% to $227.1 billion.

However, van Rijn said the picture is worse when comparing balance changes from Dec. 31 to May 30.

Those year-to-date comparisons show new car loan balances were down 1.1%, compared with a gain of 4.1% a year earlier and the first decline since 2011.

Used car loans were up only about 2% year to date, compared with a 5.3% gain a year earlier.

Meanwhile, the yield curve inversion continues to deepen. Usually long-term bond yields are higher than those for short-term notes. Inversions have preceded every recession since 1955, usually occurring about a year ahead of their start.

Yield curves are often described by comparing the 3-month and the 10-year Treasury bonds. Those yields have been inverted since May 22. Using a rolling three-month average for the difference in the yields, they’ve been negative since June 18.

“We certainly have our eye on it,” van Rijn said.

Real estate lending grew at a slower pace than past years, but it did better than other types of credit union loans. The total real estate loan balance rose 7% to $533.1 billion in May. Other 12-month growth estimates in the report show:

• Unsecured loans rose 7.9% to $107 billion as of May 31.
• Fixed-rate first mortgages rose 7.9% to $320.1 billion.
• Adjustable-rate first mortgages rose 4% to $121.1 billion.
• Second mortgages rose 13.9% to $34.6 billion.
• Home equity lines of credit rose 4.8% to $57.3 billion.
• Members grew 3.8% to 120.3 million.
• Assets grew 7.2% to $1.54 trillion.
• Savings grew 7.2% to $1.3 trillion.
• Capital grew 10.9% to $169.6 billion.