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Loan growth shows a dramatic increase
In a typical year, average credit union loan growth is 8%. If 2022 continues like the first six months, CUNA chief economist Mike Schenk said credit unions would see 20% loan growth, the fastest pace since lending began. increased by 25% in 1984.
But Schenk doesn’t think credit unions will reach that level this year.
“The key point is that lending is growing very rapidly,” Schenk says. “I don’t think the current pace will continue for the rest of the year. However, in the short term, I expect further solid growth.
“People know the Federal Reserve is going to stay aggressive,” he continues. “That means consumers will generally remain focused on borrowing before rates top. When we have that data, I’m pretty sure July will reflect an acceleration.
Overall credit union loan balances were up nearly 16% year-over-year in June and 10.2% in the first six months of the year, according to monthly credit union estimates. CUNA credit.
The near record loan growth was unexpected, although Schenk entered the year with relative optimism. Uncertainty due to the pandemic caused consumers to postpone most major purchases, and the demand that existed was often unmet due to supply chain disruptions.
The CUNA Spring Quarterly Forecast projects loan growth of 8% in 2022 and 7% in 2023, compared to 7.5% in 2021.
Auto loans led credit union loan growth in early 2022, with balances growing more than 16% year-over-year and 12% in June. Credit unions issued $460 billion in auto loans, about two-thirds of which were used auto loans.
If recent growth continues, credit unions would be on track for 24% growth in auto loan balances in 2022, Schenk says. Only 1994 reflects faster 12-month growth over the past 30 years.
Members save $1,500 on auto loans compared to what they would pay at a bank, which translates to a year’s worth of gas, Schenk says. “Access to affordable car loans is a critical part of consumer financial well-being. If people finance at a credit union, they will save enough money to buy gas at current rates for the year. next.
Credit unions are also seeing widespread loan growth, with $1.4 trillion in loans outstanding at the end of March 2022, according to the NCUA. This represents 7.9% of the household credit market.
Mortgage debt represents 51% of total credit union loans, automobiles 32% and unsecured loans 10%.
“Credit union loan growth has been broad-based, with every key portfolio growing at double-digit annual rates,” Schenk said. “Furthermore, the combination of low unemployment, rapid wage growth and rapid overall loan growth means that credit union asset quality remains at historic highs, with rates of defaults and net write-offs at their lowest levels in modern history.”
Schenk expects strong loan growth to continue as supply chain disruptions ease and consumer spending remains healthy.
“Growth will continue, but the pace may slow in the fourth quarter,” Schenk said, due to continued inflation and a higher federal funds rate.