By Michael S. Derby
NEW YORK (Reuters) – Demand for new credit in the U.S. over the last year has declined and will likely stay soft in the future, according to a survey released on Monday by the New York Federal Reserve.
There was a “notable” decline in credit over the last year, with application rates at 41.2%, compared to 44.8% in 2022 and the pre-pandemic 2019 level of 45.8%, the regional Fed bank’s quarterly Survey of Consumer Expectations Credit Access survey showed.
But even as the overall application rate for new credit declined among those surveyed, interest in applying for more credit card debt rose. The survey said that reading had hit 29% as of October and was 26% for 2023, compared to a 27.2% credit card application rate in 2019.
Over the next year, the proportion of people in the survey who plan to apply for more credit ebbed to 25.1% in October and 25.9% for the year as a whole. Last year, the proportion of those who planned to apply for new credit stood at 26.7%.
The report noted that expected decline in applications for credit extended to new credit cards, auto loans, mortgages and home refinancing. Respondents also see “significantly higher” prospects of future credit applications being turned down.
Earlier this month, a New York Fed report on total household debt levels during the third quarter found a 4.7% rise in overall credit card debt to $1.08 trillion, which it attributed to the strong economy and robust consumer spending.
Credit costs have increased markedly for borrowers on the back of aggressive Federal Reserve interest rate hikes aimed at slowing the economy to bring high inflation back to the U.S. central bank’s 2% target. Those rate increases have hit the housing sector particularly hard and brought activity there down to low levels.
The economy, however, has continued to perform robustly and the prospect that activity will remain positive despite the Fed’s monetary policy tightening has risen.
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