Consumer Lending in the US

Cautious consumer lending growth, despite rising interest rates

In 2018, consumer lending continued to see value growth, benefiting from strong consumer expenditure and expansive economic policies. The Federal Reserve continues to push for higher interest rates, with two additional rises expected before year-end, and is forecast to meet the set inflation rate, suggesting favourable economic conditions for consumer lending growth.

Shift in home ownership demographics favours mortgages/housing

Economic and demographic changes helped sustain mortgages/housing value growth over the review period. Housing loan originations have benefited from rising demand among millennials, steady immigration, as well as a gradual shift from renting to owning.

Change in government policies driving moderate growth

Earlier this year, the US House of Representatives passed a bill which repeals sections of the 2010 Dodd-Franklin act intended to limit the power of financial institutions. The bill aims to increase consumers’ access to short term and smaller value personal loans by providing regulatory relief for banks, especially those affected by The Volcker Rule.

Auto lending

Auto lending continues to see value growth, despite tightening lending requirements. Creditworthy consumers remain favoured by lenders, with the majority of auto loans being disbursed to consumers with Prime (661-780) and Super Prime (781-850) credit scores.

Looking ahead: New policies to affect growth

Uncertainty regarding possible changes in Consumer Financial Protection Bureau (CFPB) leadership, in addition to recent changes in regulation, are contributing to a slowdown of the rate at which consumer lending will grow over the forecast period. Regulations introduced to protect pay day loan borrowers through stricter requirements have been highly criticised by lenders and current CFPB leadership.

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