Consumer Borrowing to Rise

Information released by American Banker says that consumer borrowing will rise in the next six months.

According to a survey conducted by the Professional Risk Managers’ International Association, and sponsored by FICO, 61% of the risk managers surveyed believe that consumer requests for home, auto and other consumer loans will increase over the next six months. Just three months earlier the same survey found only 48% of risk managers expected that loan requests would increase in the following months.

An ample supply of credit will be available over the next six months, particularly for auto and credit card loans, say the risk manager respondents in the survey. Of the respondents, 74 percent said that credit available for auto loans would “meet or exceed” demand, while 71% said that credit card lenders would also meet or exceed demand.

The improving economy appears to be changing consumer outlook relative to taking on more debt. This is a reversal over the last several years where consumers were diligent in paying down debt.

Risk managers, based on the survey results, say that because of the better economic picture more existing borrowers will be able to keep up with their monthly payments. As to mortgage delinquencies, less than 30% of the respondents expect that loan delinquencies will rise in the next six months. At the same time approximately 50% of the risk managers expect to see no increase in delinquencies on small business or auto loans.

In looking at student loans the survey results show that risk managers are more pessimistic. Almost half of the respondents anticipate that student loan delinquencies will increase in the next six months, with 11% of the risk managers predicting that these delinquencies will “rise substantially.”

In commenting on future consumer borrowing Andrew Jennings, the chief analytics officer at Fico, says, “With both the job market and real estate sector showing signs of life, American consumers may be willing to fund their lifestyles by taking on more debt. And it appears that banks are willing to oblige.”

Kevin Hartmann