CU Loan Balances See Slowest March In Six Years

WASHINGTON—Credit union loan balances increased by 0.3% in March, an acceleration relative to the 0.1% February increase, but the slowest March increase since 2013, according to CUNA’s Monthly Credit Union Estimates for March 2019.

MCUEsMarch2019

March credit union membership growth increased to 0.27% from 0.23% in February, while year-over-year membership growth was a solid 3.8% in March.

The first quarter’s loan growth was 0.7%—slow compared to both the 1.9% fourth quarter 2018 increase and to the 1.6% in the first quarter of 2018, CUNA noted. 

“Bad weather, lingering effects of the government shutdown and lower-than-expected tax refunds negatively impacted consumers ability to make big purchases,” said Samira Salem CUNA senior policy analysis. “Nevertheless, year-over-year loan growth registered a healthy 8.1%.”

Used Cars Drive Volume

Auto loan balances increased by 0.3% in March, up from 0.1% in February. Growth was driven by used auto loans, which increased 0.5%—a bit faster than February’s 0.4% advance. In contrast, new auto loan balances declined by -0.1% in March.

“This is the second month in a row that new auto loans declined; they fell 0.3% in February. This is not surprising given that new auto sales were sluggish in the first quarter,” Salem said. “According to the National Automotive Dealers Association, ‘weather-related events, the federal government shutdown and increasing competition in the used vehicle market’ contributed to weak first quarter performance of new car sales.”  

The 10-year Treasury declined by over 30 basis points in March helping to buoy fixed-rate mortgages which were up 0.6% in the month. That increase followed a tepid 0.2% advance in February. As might be expected, adjustable rate mortgages moved in the opposite direction decreasing -0.3% in the month.

Typically Slow Month, But…

“Historically, March is a slow month for credit union credit card loan growth with an average decline of -0.6% over the past 18 years,” Salem said. “However, credit card loan growth registered 0.10% in March 2018 providing support to the idea that members may have experienced tighter financial conditions this month due to smaller or no tax refunds.”

Home Equity Line of Credit (HELOC) growth dipped into negative territory for the second month in a row. Credit union HELOC balances fell -0.2% in March, only slightly better than -0.6% decline in February.

“Average interest rates on HELOCs have increased lately, reaching 5.46% in March—which translates to an approximate 80 basis point jump from the year-ago average,” Salem said. “Even though home price appreciation has been obvious, higher interest rates are clearly dampening demand for HELOCs.”

Credit union savings balances increased by 1.8% in March, marginally slower than the 2.5% February increase. Share drafts, regular shares and CDs drove savings growth this month, registering 2.27%, 2.08% and 2.25% growth. Rising interest rates may have helped generate these results, CUNA economists believe.

Loan-to-Share Ratio Declines

“The first quarter of the year is typically the strongest quarter for savings growth. Growth for the first three months of 2019 registered a solid 4.3%, outpacing 2018 first quarter growth which was 3.8%,” Salem said. “Because savings growth outstripped loan growth liquidity pressures eased a bit.  The March loan-to-share ratio decreased for the second month in row from 84.1% to 82.8%.”

March membership growth increased to 0.27% from 0.23% in February. Year-over-year membership growth was a solid 3.8% in March.

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Copyright Year: 2019
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