- NY Fed survey finds rising demand for consumer credit broadly
- About a third think they’ll get rejected to refinance mortgage
Americans increasingly doubt they’ll get approved for a loan to buy a car or refinance a mortgage, according to a survey conducted by the Federal Reserve Bank of New York.
About a third of respondents expect they’d be rejected to refinance their mortgage in the next year, while the share for auto loans rose to 31.8% — a record in data over the past decade, according to the February survey.
Actual rejection rates aren’t that high, but some are rising — crucially at a time when applications for credit broadly are the highest since October 2022, the New York Fed said. While rejection rates fell for auto loans and credit cards, they rose for consumers seeking a higher credit limit as well as those interested in a new mortgage or refinancing an existing one.
That doesn’t bode well for people that took out an adjustable rate mortgage in 2019 or 2020 which might reset soon, now that interest rates are at the highest level in two decades. The rates on many ARMs are fixed for five years and then adjust annually.
Currently those rates are around 6.4%, while they were closer to 4% in March 2019, according to data from Mortgage Bankers Association.
ARMs often are for very large mortgages — the typical loan size averaged $800,000 in 2019. Thus, a two-percentage point jump in the loan interest rate could mean a payment increase of around $1,000 a month.
A similar survey from Bankrate this month found that half of Americans who’ve applied for a loan or financial product since the Fed started raising rates two years ago have been denied, largely stemming from applications for new credit cards and higher limits.
Written by: Alexandre Tanzi @Bloomberg
The post “More Americans Doubt They’ll Get Approved for Auto, Home Loans” first appeared on Bloomberg