According to Yahoo News, demand for new credit in the U.S. has decreased over the past year and is likely to remain weak in the future, as revealed by a survey released on Monday by the New York Federal Reserve. The quarterly Survey of Consumer Expectations Credit Access showed a significant decline in credit, with application rates at 41.2%, compared to 44.8% in 2022 and the pre-pandemic 2019 level of 45.8%.
Despite the overall decline in new credit application rates among those surveyed, interest in applying for more credit card debt increased. The survey reported that this figure reached 29% as of October and was 26% for 2023, compared to a 27.2% credit card application rate in 2019. Over the next year, the proportion of people in the survey planning to apply for more credit dropped to 25.1% in October and 25.9% for the year as a whole. In comparison, last year, 26.7% of respondents planned to apply for new credit.
The report highlighted that the expected decline in credit applications extended to new credit cards, auto loans, mortgages, and home refinancing. Respondents also anticipate significantly higher chances of future credit applications being rejected. A New York Fed report on total household debt levels during the third quarter found a 4.7% increase in overall credit card debt to $1.08 trillion, attributing this to the strong economy and robust consumer spending.
Credit costs for borrowers have risen significantly due to aggressive Federal Reserve interest rate hikes aimed at slowing the economy to bring high inflation back to the U.S. central bank's 2% target. These rate increases have particularly impacted the housing sector, resulting in reduced activity. However, the economy has continued to perform strongly, and the likelihood of activity remaining positive despite the Fed's monetary policy tightening has increased.