Dollar lending rate levels are at the ceiling - how does this affect lending activity?
Growth Trends
- Mortgage credit to individuals via bank lending represents only 20% of all mortgage debt, so this segment is not representative. However, there has been a 1.6% growth in the last six months, plus 3.4% since early 2023 (closer to 4% annualized). There was a record 9.6% growth in 2022, and the average annualized growth from Dec. 12 to Dec. 19 was only 1% (most of the growth in debt was via mortgage agencies).
- Mortgage loans to legal entities are bank loans secured directly by commercial real estate. The volume is almost 3 trillion, up 1.7% in six months, 2.4% since the beginning of 2023, also with a record 13.2% growth in 2022. The average annual growth from 2013 to 2019 was 7.2%.
Consumer credit through banks accounts for about 26% of total consumer credit, including student loans. There has been a 2.1% growth in the last six months, 1.3% since the beginning of 2023, and a 10.8% growth in 2022. The average annual growth from 2013 through 2019 was 5.5%.
- Aggregate bank lending (including all mortgages, commercial credit, consumer credit, and other types of credit) grew by 1.1% for the six months, 1% YTD, with an 11.4% growth in 2022. The average annual growth from 2013 through 2019 was 5.5%.
Interest Rate Trends
Interest rates have decreased by 4 - 5 times when evaluating the 2013 - 2019 trend, but the resilience of lending is somewhat striking given the extremely high rates. Also, the economy's response to financial conditions was more negative in the first half of 2023 than in the second half of 2023.
There is a slowdown in the decline in corporate lending, slightly higher rates for consumer loans, and a still positive trend for mortgage loans.
It should be emphasized that the main phase of credit decline during the 2009 crisis was realized from 2010 to 2012.
Conclusion
In conclusion, the current situation of dollar lending rates reaching their ceiling has brought about diverse effects on lending activity across various economic segments. Mortgage credit to individuals, though not entirely indicative, has displayed a modest growth trend in recent months, reaching a record high in 2022. Mortgage loans extended to legal entities, backed by commercial real estate, have also exhibited growth, albeit at a slower pace compared to previous years. Consumer credit facilitated by banks has shown a positive trend, with growth observed in 2022 and moderate increases in recent months. Despite the challenging interest rate environment, lending activity appears to retain a degree of resilience.