Car Lending Slows, Mortgages Rise in July

Car lending continued to weaken in July, while mortgages grew at a healthy pace, according to a CUNA report issued Friday.

CUNA’s Monthly Credit Union Estimates showed the nation’s 5,529 credit unions held $1.09 trillion in loans July 31, up 6.1% from a year earlier.

Real estate lending, which accounts for about half of credit union loans, grew 7.3% to $542.9 billion in July. It was the best 12-month portfolio growth since March, but still below the 9.2% growth from July 2017 to July 2018.

Car lending at credit unions grew 4.3% to $376.5 billion in July—its slowest 12-month growth rate in at least five years, and down from growth of 10.3% from July 2017 to July 2018.

New car loans grew 3.5% to $147.8 billion in July, while used car loans grew 4.9% to $228.8 billion at credit unions.

Nationally, new car sales in July came in at a seasonally adjusted annual rate of 16.8 million vehicles, up 1.7% from July 2018 and exceeding analysts’ expectations, according to Edmunds, a Santa Monica, Calif. company providing automotive analysis for consumers.

“Although July bucked the pattern of year-over-year declines, we expect sales to resume their downward trend in the remaining months of the year,” a recent Edmunds report said.

For the year, Edmunds expects 16.9 million new cars will be sold, down 2.3% from 2018 and 3.4% lower than the post-recession peaks of 17.5 million cars in 2015 and 2016.

Edmunds found the average new car loan was $32,590 in August, up 5.2% from a year earlier, while prices rose 2.8% to $37,051. Down payments fell 1.6% to $3,991.

The average new car loan was for 69.6 months with a 5.8% APR and a monthly payment of $556. A year earlier the average loan was a month shorter with the same APR and $20 less in monthly payments.

Used car loans rose 3% to $22,252 in August, according to Experian. Down payments rose 2.1% to $2,655. The average loan carried a term of 67.4 months, up six months from a year earlier, while APRs rose about 20 basis points to 8.5%.

The Mortgage Bankers Association expects portfolios among all lenders will rise 3% to $10.59 trillion by Sept. 30. MBA forecasts originations will grow 32.4% in the third quarter, with purchase originations rising 8.4% to $375 billion and refinancing spiking 107% to $146 billion.

MBA economist Joel Kan said Wednesday that the Fed’s 25 basis point rate cut July 31 has provided fuel for mortgages, but purchase lending especially is tempered by uncertainty hovering around the trade war.

“Purchase applications increased 1% last week and were 5% higher than a year ago. Consumers continue to act on these lower rates, but the volatility in the market is likely leading some borrowers to pause refinancing and buying decisions,” Kan said.

CUNA’s report estimated credit unions had 120.8 million members in July, up 3.4% from a year earlier. It also estimated 12-month growth for most lines of credit union balance sheets as of July 31:

• Fixed-rate first mortgages rose 8.6% to $328.4 billion.
• Adjustable-rate first mortgages rose 4.2% to $120.4 billion.
• Second mortgages rose 16.3% to $36.1 billion.
• Home equity lines of credit rose 3.9% to $58 billion.
• Assets grew 6.4% to $1.54 trillion.
• Savings grew 6.9% to $1.3 trillion.
• Capital grew 9.9% to $171.5 billion.