Fed: Credit Harder to Come By in Fourth Quarter

Consumers and businesses in the United States found obtaining credit more difficult in the fourth quarter of 2007, according to a survey of 56 U.S. banks and 23 foreign creditors released this week by the Federal Reserve. The banks said that credit standards had tightened across nearly all credit products, including credit cards.

In its January 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices the Fed reported that the category with the most marked tightening was commercial property loans, with 80 percent of banks reporting they had raised lending standards for that type of loan, a record number since commercial property loans began to be included in the survey in 1990.

Credit card standards also showed a trend toward tightening. About 10 percent of the banks reported that they had tightened their lending standards on credit card loans over the past three months. In the last survey, released in October and covering the third quarter of 2007, only 5 percent reported tighter credit card lending standards.

The survey also showed that consumer demand for credit was down in Q4 2007. About 35 percent of domestic institutions indicated that they had experienced weaker demand for consumer loans of all types.

As for the closely-watched mortgage market, about 55 percent of respondents indicated that they had tightened their lending standards on prime mortgages, up from about 40 percent in the October survey, and 85 percent reported a tightening of their lending standards on “non-traditional” mortgages over the past three months, compared with about 60 percent in the October survey.

The 56 domestic banks that responded to the survey have a combined $5.95 trillion in assets, about 54 percent of the country’s $11.1 trillion total for all domestically chartered, federally insured commercial banks.