According to the Federal Reserve’s January 2025 Senior Loan Officer Opinion Survey, business loan standards are tightening, household loan standards are unchanged, commercial and industrial loan demand is rising, and residential real estate loan demand is weakening.
January 2025 Federal Reserve Survey Mixed Trends in Bank Lending Practices
The Federal Reserve’s January 2025 Senior Loan Officer Opinion Survey on Bank Lending Practices is a mixed picture of the activities of lending in the United States for the fourth quarter of 2024. The survey is based on responses from senior loan officers in a number of banks, indicating a tightening of and stability in the standards for lending across sectors.
Tightening of Lending Standards for Businesses
According to the survey, a small net share of banks have tightened standards on commercial and industrial loans to big and middle-market clients; however, a moderate net share indicated a similar tightening in small firms. The trend may imply that the banks are practicing conservative credit to businesses, or it might be because of some sense of uncertainty about the economy or even risk management strategy.
Loosened Lending Standards for Households
Contrary to this, standards for household loans did not change significantly. This was seen in all categories; residential real estate loans and auto loans experienced minimal change. However, as for credit card loans, banks report a moderate net share tightening standards within consumer lending, which is selective.
Variations in Loan Demand
In addition, the survey revealed shifts in loan demand. The large and middle-market companies presented stronger C&I loans, whereas the demand from small companies remained relatively the same. The residential real estate loan, especially the mortgage type, saw weakening demand. Housing loan demand also dropped consistent with the market perception that the housing market is slowing.
2025 Outlook
Looking ahead, banks expect either easing or continued current lending standards on all loan categories during 2025. In addition, they expect a rise in demand for loans, especially in business lending. On the improvement side in terms of loan performance, banks generally expect business loan quality to improve, although they are apprehensive of some potential deterioration in consumer loan segments.
These insights from the Federal Reserve survey give a rather comprehensive overview of current lending practices and expectations, reflecting both the dynamic interaction between economic conditions and credit markets.
