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Home Commercial Lending

Banks See Rising Demand for Jumbo Mortgages as Broader Credit Market Stabilizes

May 3, 2021
Reading Time: 2 mins read

Rising home prices in many U.S. markets appear to have pushed up demand for—and banks’ offering of—jumbo mortgage loans, according to the Federal Reserve’s senior loan officer survey released today. Meanwhile, the market for commercial and industrial and commercial real estate loans continued to stabilize as the economic outlook improved—although banks’ standards were still tighter on net for both business and personal loans than they were compared to the end of 2019, even for investment-grade or prime borrowers.

  • Mortgages. Almost all banks kept standards unchanged for conforming and government mortgage loans in the first quarter, with just 5% of banks reporting easing standards in these categories. However, with housing prices spiking across the country in the first quarter, 19% eased standards for Qualified Mortgage-designated jumbo loans, 18% eased standards on non-QM jumbos and 16% eased on non-jumbo, non-conforming QMs. After demand for mortgages cooled in Q4 on the heels of a Federal Housing Finance Agency refinance fee, double-digit shares of banks on net saw growing demand for jumbo loans. One in six banks eased standards on home equity lines of credit.
  • C&I. A substantially larger share of banks reported easing standards for business loans, reversing the trend seen in the final quarter of 2020. On net, 15% of banks eased terms for large and midsize firms, while 13% eased standards for small businesses. More than three-quarters kept standards unchanged. Banks that eased standards cited more aggressive bank and nonbank competition and the improving economic outlook as the most important reasons. C&I loan demand was mixed, with four in 10 banks reporting unchanged demand and the remainder split between seeing more or less demand—but the share reporting weaker demand declined from the prior quarter. Banks seeing stronger C&I demand said the most important factors were growing client M&A and inventory financing needs.
  • CRE. The CRE market continued to stabilize in Q1, with roughly three-quarters of banks keeping standards unchanged for construction and land development loans and multifamily CRE loans. On net, 9% of banks saw stronger demand for construction and land development loans and 17% saw stronger demand for multifamily loans, while a net 10% saw weaker demand for nonfarm CRE loans.

Personal loans. The late 2020 trend in easing standards for consumer credit accelerated, with 27% of banks on net easing standards on credit card loans, 18% on net easing standards on auto loans and 17% reporting eased standards on other consumer loan types. The Q3 pattern of eased standards for auto loans also continued. Demand was mixed for credit cards and was moderately stronger for car loans.

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