Amid all the complaints about the slow economic recovery and sluggish labor market, there's been one recurring gripe that many experts blame for economy's seeming inability to bounce back: bankers have been a bunch of tightwads.
Their hesitance to lend has stunted the economy some economists say, because the United States' heavily consumer-spending fueled economy depends on a relatively liberal flow of credit to support recovery and growth.
No lending means no spending, experts say, which ultimately means no recovery.
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Five years out from the worst recession in recent history, lending standards have started to loosen a bit, but bankers still maintain a tight grip on credit availability. But that could be changing, according to a new report from financial analytics firm FICO, which found that optimism appears to be growing among bank risk professionals who play a role in determining financial institutions' lending practices.
"We're beginning to see some emerging positive signs for the U.S. economy," says Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. "As unemployment falls, even modestly, and four years of deleveraging begin to pay dividends, bankers are allowing themselves to feel some optimism."
And the change has been fairly dramatic. Just three months ago, bankers had a relatively negative outlook for delinquencies with almost half of those surveyed expecting more borrowers to come up short on payments. Now only 35 percent expect delinquencies to increase, the least amount since FICO launched the survey in 2010.
More optimism among bankers could mean more lending this year, experts say, which could in turn boost consumer spending and help the economy gain more ground. More than three quarters of those surveyed expected adequate credit availability for car loans and 71 percent thought the same for credit cards. Those figures weren't as high for small business and student loans—just more than half expected small business owners to be able to get loans while 58 percent expected the supply of student loans to be adequate.
"These results are consistent with the general sentiment that delinquencies will be less of a problem over the next six months," Jennings said in a statement. "As lending risk—both perceived and real—declines, the natural reaction by lenders is to loosen the purse strings and extend more credit. This should be welcome news to consumers and businesses alike, because increased access to credit is a key driver of economic growth."
But while consumers might find it easier to get a credit card or an auto loan, there's still one area of lending that continues to lag: residential mortgages. Even though fewer bankers expect delinquencies to rise in the home loan space, the uncertainty plaguing the real estate market is still spooking lenders.
That's made the industry more reserved when it comes to predicting how available mortgage credit will be to would-be buyers this year. Just 56 percent believe the supply of mortgage credit will meet demand for home loans.
"There's still a lot more concern around the supply of mortgage credit," Jennings says. "There's enough uncertainty around future foreclosures and around future movements in house prices that lending standards are still high in the residential mortgage market. They've loosened in credit cards and auto loans in particular."
Still, the fact that fewer lenders expect delinquencies to rise is a good sign, Jennings says. "That's obviously a good thing for consumers," he adds. "It means less consumers are anticipated to get into trouble."