US CREDIT conditions on bank loans eased in the three months to October, data showed yesterday, but this improvement was not enough to boost demand for mortgages, according to separate statistics.
Banks are dropping both standards and terms, the Federal Reserve said, driven by fierce competition from other banks as well as non-bank lenders.
US banks’ lending in Europe has also sagged, as US banks attempt to reduce their exposure to the crisis-ridden Eurozone.
In spite of these easier terms, mortgage demand declined, though the figures refer to a slightly later period. Applications for home mortgages slipped 4.8 per cent last week, compared to the week before, the Mortgage Bankers Association said, even after the latest open-ended bout of quantitative easing.
But Daniel Silver at JP Morgan said that the weekly fall might not be indicative of a general decline. “Overall the housing data has been favourable,” he said. “New home construction, new home sales – levels are still very weak, but you see growth rates picking up, and it is pretty clear that it is on an upward trend.”
This data came as the Obama administration said it would hit the legal debt limit before the end of the year, which would force a default if Congress were unable to agree on either a raise in the limit, tax hikes, or spending cuts.
On Monday the US Treasury stood just $235bn (£145.5bn) below the $16.4 trillion limit – about enough, the Treasury said, to keep the federal government going to the end of the year. The possibility of a debt limit stand-off only adds to the current struggle over the so-called fiscal cliff, which will hit the US economy with big tax rises and spending cuts.