US demand for credit cards remains strong amid rising interest rates, New York Fed says

By Emma Ockermann

Demand for other consumer credit, such as mortgages and auto loans, cooled

Credit card application rates have remained high this year, averaging 26.7% — 3.6 percentage points above the average rate for 2021 — amid sharp increases in balances and record-high credit card rates, a survey released Monday by the Federal Reserve Bank of New York showed showed.

Elsewhere in the year, demand for consumer credit weakened or remained stable for much of the year, and denial rates for loan applications other than new credit cards rose slightly, according to the New York Fed’s Survey of Consumer Expectations Credit Access Survey. The average application rate for each type of loan in 2022 was 44.8%, slightly lower than the 45.6% in 2021 and the pre-pandemic rate in 2019 of 45.8%.

Current application rates for those with credit scores below 680 who have rebounded over the past year also remain lower than before the pandemic — although current applications with credit scores above 760 are higher, the New York Fed said. And consumers reported a slightly lower likelihood of applying for at least one type of credit over the next 12 months, at 26.7% for 2022 overall compared to 29.5% last year, attributed to those with a credit score less than 680.

At the same time, households reported a slightly lower likelihood of needing $2,000 for an unexpected expense next month and a lower likelihood of being able to find that amount of money when needed compared to a year earlier.

“Looking ahead 12 months, households believe they are less likely to apply for an auto loan, mortgage, or mortgage refinance loan, but report a higher average likelihood of applying for a credit card or an increase in credit card limit. ‘ the New York Fed said in a statement. “Consumers expect some relaxation in credit standards and report slightly lower average perceived probabilities that a future loan application will be denied, provided the application is made within the next 12 months.”

The mortgage loan application rate fell from 8.5% in October 2021 to 6.7% in October 2022 as interest rates soared, and the average application rate for the year as a whole was 0.8 percentage points lower at 7.2% the 2021 average, the New York Fed said.

Mortgage refinance applications were also much lower in 2022, falling from 21.4% last October to 8.9% in October this year, although this is “comparable to the level seen in the October 2017-2019 period prevailed during the recent refinancing boom”. according to a press release from the New York Fed.

The October 2022 auto loan application rate was 12.9%, flat year-over-year, although the average application rate has fallen to 13% in 2022 from 14.6% last year, the New York Fed added.

– Emma Ockerman


(ENDS) Dow Jones Newswires

11/21/22 1209ET

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