Consumers see lower likelihood of applying for auto loans, mortgages for year ahead


U.S. consumers said they’re less likely to apply for an auto loan, mortgage, or mortgage refinancing within the next 12 months, but are more likely to apply for a credit card or seek a higher credit limit on their existing cards, according to the New York Fed’s Survey of Consumer Expectations Credit Access Survey. That comes against a backdrop of rising interest rates, as the Federal Reserve boosts its key rate to lower demand in order to rein in inflation.

Most credit application rates are stable or weakening, except for a rise in credit card applications. Overall, the average 2022 application rate of 44.8% was slightly below the 2021 level of 45.6% and below the 2019 level of 45.8%, the New York Fed said. Current application rates for any type of credit are staying below prepandemic levels for those with credit scores below 680 but are higher for those with scores higher than 760.

Reported rejection rates among applicants increased by 0.5 percentage points to 18.0% in 2022 from 17.5% in 2021, just above the 17.6% rejection rate in 2019.

The percentage of respondents who said they’re likely to apply for at least one type of credit in the next year fell slightly to 28.0% in October 2022 from 28.9% in October 2021 and 29.5% for 2021 overall.

The starkest contrast came in the demand for mortgages. The average likelihood of applying for a mortgage dropped to 7.3% from 8.5%, and the likelihood of applying for a mortgage refinance over the next 12 months reached a new series low of 4.9% in October 2022.

The average likelihood of applying for an auto loan slipped to 10.9% from 11.5% in October 2021.

Meanwhile, the average likelihood of applying for a credit card rose to 13.6% from 12.0% a year ago, and the average likelihood of applying for a credit limit increase rose to 7.2% from 6.9% in October 2021.

Consumers expect some easing in credit standards, reporting slightly lower average perceived likelihoods of a future credit application being rejected, conditional on applying over the next 12 months, the New York Fed said.

The findings are positive for credit card stocks like American Express (NYSE:AXP), Capital One Financial (NYSE:COF), Discover Financial Services (NYSE:DFS), Synchrony Financial (NYSE:SYF), and Bread Financial Holdings (NYSE:BFH).

For mortgage and auto loan originators, results aren’t as optimistic. Such stocks include Rocket Companies (NYSE:RKT), UWM Holdings (NYSE:UWMC), loanDepot (NYSE:LDI), PennyMac Financial Services (NYSE:PFSI), Ally Financial (NYSE:ALLY) and Credit Acceptance (NASDAQ:CACC).

Last week, mortgage rates tumbled to 6.61% as of Nov. 17, down from 7.08% in the previous week, marking the biggest drop since 1981.

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