Lending standards for business loans tightened during the third quarter of 2023, with weaker demand for commercial and industrial loans to firms of all sizes, according to the Federal Reserve’s senior loan officer opinion survey released today. Also, banks reported tighter standards and weaker demand for all commercial real estate loan categories.
C&I. Significant net shares of banks (20%-50%) reported having tightened standards on C&I loans to firms of all sizes. Tightening was most widely reported for premiums charged on riskier loans, spreads of loan rates over the cost of funds, and costs of credit lines, while significant or moderate net shares of banks (10%-20%) reported tightening all other terms on C&I loans to firms of all sizes. Tightening of C&I lending standards and terms was less widely reported by large banks than by other banks.
CRE. Major net shares of banks (50% or more) reported tightening standards for all types of CRE loans. Such tightening was more widely reported by other banks than by large banks. Major net shares of banks reported weaker demand for all CRE loan categories.
Mortgages. Banks reported having tightened lending standards for all categories of residential real estate loans and HELOCs, except government residential mortgages, for which standards remained basically unchanged. Significant net shares of banks reported tightening standards for qualified mortgage jumbo residential mortgages, non-QM residential mortgages, and HELOCs, while moderate net shares reported tighter standards on QM non-jumbo non-government-sponsored enterprise-eligible residential mortgages and subprime residential mortgages. A modest net share of banks (5%-10%) reported tightening standards for GSE-eligible mortgages, and standards for government residential mortgages remained basically unchanged.
Personal lending. Significant net shares of banks reported tightening lending standards for credit card and other consumer loans, while a moderate net share of banks reported tighter standards for auto loans. Banks also reported tightening most queried terms on credit card loans. Specifically, significant net shares of banks reported tightening both credit limits and the extent to which loans are granted to some customers that do not meet credit scoring thresholds, while moderate net shares of banks reported higher minimum required credit scores and wider interest rate spreads over the cost of funds.