Membership, loan growth slowed in January, MCUEs show

March 19, 2019

Credit union membership and loan growth weakened in January, but year-over-year membership and loan growth rates remain a strong 4.23% and 8.99% respectively, according to CUNA’s latest Monthly Credit Union Estimates. Monthly membership and loan growth in January fell to 0.16% and 0.34%, respectively, from the December growth rates of 0.33% and 0.53%.

“While January is a historically slow month for membership and loan growth, the pace of growth for both hasn’t been this slow since January 2013,” said Samira Salem, CUNA senior policy analyst. “Increasing interest rates, decreasing consumer confidence, and uncertainty due to the partial government shutdown likely contributed to weaker growth. Nevertheless, year-over-year credit union membership and loan growth rates remain a strong 4.23% and 8.99%.

Adjustable rate mortgage growth increased to 0.55% from 0.00% in December. By contrast, fixed rate mortgage growth at credit unions declined to -0.28% in January from 1.28% in December.

“It’s important to note that the year-over-year (YOY) growth figures reflect a continuing shift towards adjustable rate mortgages,” Salem said. “These figures show 10.88% YOY growth for adjustable rate mortgages compared to 7.07% growth for fixed rate mortgages.”

Jerome Powell, Federal Reserve Chairman, announced at the end of January that the Federal Reserve would be patient on any future Fed Funds target rate hikes, making adjustable rate mortgages less risky and potentially more attractive for borrowers.

As a result, CUNA economists expect this shift towards adjustable rates mortgages on the part of borrowers to continue, at least in the short term.

Home Equity Lines of Credit (HELOCs) registered a strong growth rate of 2.81% in January up from -1.48% in December.

“Traditionally, HELOC growth bounces back after slowing in December. It’s conceivable that this is happening, in part, because consumers rack up credit card debt in December as part of their holiday spending and then they shift this debt to HELOCs, which carry a lower interest rate than credit cards,” Salem said.

Used auto loans grew 0.61% in January as compared to 0.21% in December while new auto loan growth slowed to 0.14% from 1.10% in December.

“This slowdown in growth is not surprising given that Cox Automotive reports that January used vehicle sales were down by 1.10% from a year ago and new vehicle sales were down 2.10% from a year ago,” she said. “Year-over-year growth rates for new and used auto loans were 11.30% and 9.23% and reflect an overall slowing in auto lending from previous years.”

Credit union savings growth was down -0.07% in January. This was due to a decline in share draft growth and regular share growth of -2.50% and -0.49%, respectively. January is traditionally not a good month for share draft or regular share growth.

“Historically though 60% of annual savings growth comes from the first quarter—when people receive their tax refunds—so we expect it to pick up in February and March although likely not as much as in previous years given reports of lower tax returns this year,” Salem said. “That said, year-over-year share draft and regular share growth rates were 7.75% and 5.50%, respectively. By contrast, certificates of deposit (CDs) registered significant growth at 1.82% in January up from 1.00% in December. Relatively more attractive interest rates on CDs compared to other savings products may be driving this pace of growth.”

The loan-to-share ratio continued to climb this month as loan growth outpaced savings growth by a significant amount.