Bloomberg News
The numbers: Banks eased standards on commercial real estate loans for the first time in almost three years, according to the Fed’s quarterly survey of senior loan officers, released on Tuesday. Over the past year, banks eased important lending terms — including maximum loan size and the spread of loan rates over their cost of funds — on all three commercial real estate loan categories: construction and land development loans, nonfarm nonresidential loans and multifamily loans. Demand for all types of business lending reportedly weakened.
For consumers, mortgage loan standards were basically unchanged while standards for auto and credit card loans tightened modestly. There was weak demand for most categories of household loans.
The Fed surveyed officers at 72 domestic banks.
What happened: Almost all the banks reported they had eased commercial real estate credit policies because of more aggressive competition from other banks or nonbank lenders.
Big picture: Some Fed officials may not be comfortable with the easing in the commercial real estate market. Financial conditions have remained easy despite the central bank hiking interest rates. Boston Fed President Eric Rosengren has expressed concern that low interest rates may be sparking a bubble in the commercial real estate sector.
What they are saying: Jim O’Sullivan of High Frequency Economics estimates the rate of growth in bank loans remains down from two years ago. His measure of “core” bank loans, which includes commercial and industrial loans, consumer and real estate, is up 4.5% in the past year, down from a high of 7.8% in 2016.