RISMEDIA, July 14, 2008-The credit crunch is impacting not only consumers’ ability to get credit, and how they use it, but also-for some-their mindset towards financial institutions, according to a nationwide survey conducted by Deloitte’s financial services industry group.
According to those who have attempted to secure several types of credit and mortgage products over the past year, a majority found it to be more difficult. Deloitte’s survey revealed:
- Of those who applied for a home mortgage, 67 percent found it more difficult; for a home equity line of credit (HELOC), that number was 65 percent.
- Personal loan applicants weren’t much better off, with 62 percent finding it harder to get credit.
- More than three-quarters (76 percent) of those who applied for small business financing found it more difficult, compared with one year ago.
“Given that more than 90 percent of those surveyed believe the U.S. economy is experiencing little or negative growth, it is not surprising that consumers are restricting spending and delaying large purchases,” said Jim Reichbach, Deloitte’s Financial Services industry leader. “Quite simply, they do not want to extend themselves further. At the same time, banks have limited access to credit for some consumers, while more aggressively targeting the better credit-quality consumer.”
Despite the negative headlines that financial institutions have been receiving in the United States, the survey found that two out of three consumers (67 percent) held the same perception of their primary financial institution as they did before the crunch. For the 5 percent who see their relationship as more positive, they cited enhanced customer service and an increased number of products and incentives to choose from as top reasons.
On the opposite side of the coin, 15 percent of survey respondents have come to view their banking relationship more negatively over the past year. For those who have changed banks (5 percent overall), the key reason specified was a rise in costs and fees.
“As past surveys have shown, financial institutions have not done a good job at engendering customer loyalty and, given the events of the past year, need to re-establish consumer trust,” said Adam Schneider, a principal with Deloitte Consulting LLP, who works with banks and other financial institutions. “Business models are changing and some of the best-run banks are taking steps to strengthen their credit and mortgage businesses. They recognize that when balance sheets are rebuilt they will have to restart lending, but are likely to be more conservative and focused on the most credit-worthy.”
Among other findings of the survey:
- More than half (59 percent) of respondents did not find it any harder to obtain credit cards over the past year. However, the economy is having an effect, with 40 percent of respondents reporting spending less on their cards now than in the past. For those who reported spending more on their credit cards than they would have in the past, they are often using them for essential purchases: 70 percent are using them more often for gas, while 67 percent are doing so for food/groceries, 24 percent for health care and 14 percent for utilities.
- Three out of four respondents reported they are not at all likely to buy a home in the next year, given the current economic environment, and 69 percent are not at all likely to refinance an existing home. On the other hand, 69 percent are not at all likely to sell a home, potentially pointing to a continued stagnation in the housing market with both buyers and sellers reluctant to make a move.
- Of respondents who have a mortgage, 91 percent have made their mortgage payments either early or on time over the past year.
- Surprisingly, only 2 percent of respondents from the four states that have been hardest hit by the mortgage crisis (California, Florida, Arizona and Nevada) said they’ve been late, compared with 6 percent for all respondents.
A full 80 percent of respondents felt that the presidential candidates have not sufficiently communicated how they will improve the economy. A plurality of 28 percent believes the next president should focus first on jobs to help improve the economy, with foreign trade being a distant second at 12 percent of respondents.
There is light at the end of the tunnel, as 62 percent indicated they thought their financial situation would be better, or the same as it is now, by this time next year.
Deloitte commissioned the study from Harris Interactive, interviewing a nationwide sample of 2,019 U.S. adults from June 5 through 9, 2008.
For more information, visit http://www.deloitte.com.
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