The demand for consumer credit declined in 2022, led by plummeting demand for mortgage refinancing, according to the Federal Reserve Bank of New York.
The N.Y. Fed’s Center for Microeconomic Data on Monday released its latest Consumer Expectations (SCE) Credit Access Survey, which provides information on consumers’ experiences with, and expectations for, credit demand and credit access. The survey is fielded every four months, most recently in October, the results summarizing trends from the past year are released annually in November.
The latest survey revealed a decline in consumer credit demand in 2022, with most credit application rates stable or weakening, except for a rise in credit card applications. Current application rates for any type of credit remain below pre-pandemic levels for those with credit scores below 680, but are higher for those with credit scores over 760, the study said.
Reported rejection rates on credit applications rose slightly overall, but declined for new credit card applications. The strength in credit card demand and access coincided with the record growth in credit card balances over the past year.
Application rates for mortgage refinancing plunged during 2022, falling from 21.4% in October 2021 to 8.9% in October 2022 — comparable to levels that prevailed during the October 2017-19 period, before the recent refi boom.
Mortgage loan application rates also fell — from 8.5% in October 2021 to 6.7% in October 2022. The average mortgage rate for 2022 overall was 7.2%, 0.8 percentage points below the 2021 average and 0.7 percentage points below the 2019 average, the survey found.
By comparison, the application rate for credit cards remained robust during 2022, reaching 27.1% in October 2022, above its October 2021 level of 26.5% and its pre-pandemic reading of 26.3% in February 2020. The average application rate for credit cards for 2022 overall was 26.7%, 3.6 percentage points higher than the average rate for 2021.
The reported average rejection rates for auto loan, mortgage loan, and credit card limit extension applications in 2022 exceeded those in 2021, while those for credit card applications declined slightly.
The average rejection rate for mortgage applications increased by 2.2 percentage points to 14.6% in 2022, considerably above the 2019 rate of 10.2%. The average rejection rate on mortgage refinance applications remained stable, at 9.9% in 2022.
Looking ahead over the next 12 months, households surveyed said they anticipate being less likely to apply for an auto loan, mortgage, or mortgage refinance loan, but report a higher average likelihood of applying for a credit card or credit card limit increase. 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 SCE Credit Access Survey, fielded as part of the Survey of Consumer Expectations, provides information on consumers’ experiences and expectations regarding credit demand and credit access. Every four months, SCE panelists are asked whether they applied for credit in the past 12 months and the resulting outcomes. They are also asked about their expectations of applying for credit over the next 12 months and the perceived likelihood of those applications being accepted.
This information is collected for five specific credit products: auto loans, credit cards, credit card limit increases, mortgages, and mortgage refinancing. Survey findings (in instances with sufficient sample sizes) are also presented separately by age and self-reported credit score subgroups.
