The proportion of consumers who applied for credit and reported feeling “discouraged” by or “rejected” in their experience has clawed higher, especially among mortgage refinance applicants, in the Federal Reserve Bank of New York’s recently released Survey of Consumer Expectations (SCE) Credit Access Survey for October 2016. The finding underscores the overall sentiment of the consumers surveyed, which, according to the New York Fed, is “deteriorating.”
Highlights from the Survey:
- The proportion of credit applicants who were granted credit (either through an auto loan, credit card, credit card limit increase, mortgage or mortgage refinance) in the last year was 32.4 percent in October, the lowest percentage since February 2015; the proportion of credit applicants who were rejected in the last year was 8.0 percent in October, up from 9.9 percent in June.
- The mortgage refinance application rate jumped to 13.6 percent in October, the highest percentage since February 2014 and up from 10.2 percent in June, potentially reflecting the motivation to secure a lower interest rate.
- Rejections in all credit types were concentrated among low-risk score and younger credit applicants, with the per-applicant rejection rate and the per-application rejection rate both at levels also not seen since February 2015. The rejection rate for mortgage refinance applications was 23.6 percent in October, up from 17.3 percent in June.
Looking ahead, the proportion of consumers who are likely to apply for credit in the next year declined to 27.8 percent in October from 28.4 percent in June, the lowest percentage since October 2013—the inception of the Survey. The trend was driven largely by consumers with a credit score above 680 and/or younger than age 60.
The proportion of consumers who perceive they will be rejected for a mortgage refinance in the next year, however, also declined, down to 21.4 percent in October from 26.7 percent in June.
Source: Federal Reserve Bank of New York