Slowing Loan Growth Continues for Credit Unions in November

Automobile lending remained one of the slowest-growing parts of credit union portfolios in November, while unsecured consumer credit and first mortgages beat average growth, a CUNA report showed.

The Madison, Wis., trade group’s Monthly Credit Union Estimates found the nation’s 5,469 credit unions held $1.13 trillion in total loans as of Nov. 30, up 6.2% from a year earlier.

The best performance came from fixed-rate first mortgages, which rose 12.1% to $344.7 billion in November as the refinancing wave continued.

The worst showing was new auto loans, which rose 0.2% to $148.7 billion in November as the number of new cars sold fell nationally.

Used car loans did substantially better for credit unions, rising 4.7% to $232 billion. However, the pattern of sliding rates of growth for overall car lending continued as November’s 2.9% gain set a new record monthly low since at least mid-2014, according to data available from CUNA Mutual Group.

Using NCUA’s fourth-quarter data, the November growth rate for auto lending was the lowest since it was 0.4% in 2011. The total loan growth was the lowest since 2012’s 4.6% gain.

As of December, the Mortgage Bankers Association was expecting first mortgage originations to rise 63% to $637 billion in the fourth quarter among all lenders, with the increases tapering down to 44% in the first quarter and 1% in the second quarter.

The lion’s share of the fourth-quarter growth was expected to be from refinances, which were projected to account for nearly 51% of mortgage value.

The surge of refinancing has been fed by falling interest rates. During November, the average 30-year mortgage rates fell about 10 basis points to 3.68%. As of January 9, they were 3.64%, down from 3.95% about a year earlier, according to the St. Louis Fed.

MBA Chief Economist Mike Fratantoni said he expects refinances to trail off in the first half. “Homeowners would need to see a sharp drop in rates to reinvigorate the refinance wave seen in 2019,” he said.

Purchase loans were expected to rise 8% in the fourth quarter, and 7% in the first quarter.

“We expect that the strong job market will continue to support purchase activity this year, and the uptick in housing construction towards the end of last year should provide more inventory for prospective buyers,” Fratantoni said.

Interest rates were also falling in November for car loans, but their effect was less. Rates were 5.4% on new cars in December, down from 5.9% a year earlier. Used car rates were 8.2% in December, down from 8.7% a year earlier, according to Edmunds, an automotive analytics company in Santa Monica, Calif.

“The fact that rates have been on a steady decline for the last several months bodes well for more favorable financing conditions in 2020,” said Jessica Caldwell, executive director of insights at Edmunds.

Americans bought 17.1 million new cars in 2019, down 1.6% from 2018, but they took out larger loans as prices rose and down payment rates fell.

The average borrower financed $33,865 for a new car in December, up 5.6% from a year earlier. The average used car loan was $22,660, up 2%, according to Edmunds.

The Fed reported last week that credit card balances grew 6.1% to $65.1 billion in November at credit unions. Based on that, CUNA’s estimates show unsecured consumer term loans grew 6.5% to $46.4 billion.

CUNA’s other estimates of 12-month changes for November, included:

• Members grew 3.5% to 122.3 million.
• Adjustable-rate first mortgages rose 2.5% to $125 billion.
• Second mortgages rose 6.2% to $34.9 billion.
• Home equity lines of credit rose 2.3% to $58.6 billion.
• Assets grew 7.7% to $1.6 trillion.
• Savings grew 8.1% to $1.35 trillion.
• Capital grew 11.3% to $177.3 billion.