MCUEs: December sees fastest loan growth since Dec. 2017

March 6, 2020

Credit union loan growth was a healthy 0.84% in December, up from 0.55% in November, according to CUNA’s Monthly Credit Union Estimates for December 2019. Credit card loans led loan growth during the month, rising 2.6%, followed by adjustable-rate mortgages (2.4%), fixed-rate mortgages (1.9%), unsecured personal loans (1.5%), used auto loans (0.4%), and new auto loans (0.1%).

“This represents the fastest December loan growth since 2017,” said CUNA Senior Policy Analyst Samira Salem. “Despite the solid performance in the last month of the year, credit union loan portfolios are on pace to increase 6.62% in 2019, which is the slowest annual increase since 2012.”

On the decline during the month were home equity loans (-1.0%) and other mortgage loans (-1.3%).

A slowdown in auto loan growth—which represents approximately one-third of the credit union loan portfolio—contributed to the slower credit union loan growth in 2019. According to the monthly estimates, annual auto loan growth was just 2.55%.

“If that figure holds up, it would represent the slowest annual growth rate since 2011. This result was largely driven by the slowdown in the annual growth of new auto loans, which fell from 11.64% in 2018 to -0.94% in 2019,” Salem said. “The pace of used auto loan growth also slowed, but not to the same extent. The monthly estimates show that it declined from 9.02% in 2018 to 4.91% in 2019. Steadily rising interest rates on both new and used auto loans may be contributing to the slowdown. Indeed, interest rates on new auto loans increased 1.93 percentage points from 3.73% in December 2018 to 5.66% in December 2019, while interest rates on used auto loans increased 0.60 percentage points over the same period.”

The low and decreasing mortgage rate environment in 2019 contributed to healthy mortgage growth at credit unions. Total first mortgages were up a strong 2.01% in December from 1.29% in November. Total first mortgages are on pace to increase 10.44% in 2019.

“This would be the fastest annual growth rate since 2007. Fixed mortgages increased 1.89% in December, up from 1.50% in November. Annual fixed-rate mortgage loan growth was a healthy 11.99% in 2019,” Salem said. “Adjustable-rate mortgages ended the year on a strong note with 2.35% growth in December—representing a significant increase from 0.71% growth in November—but they are still on pace to increase just 6.38% for the year (the slowest annual growth rate since 2013).”

December credit card lending growth was up 2.61% from 0.19% in November. Unsecured personal loans increased 1.51% in December, up from 0.50% in November.

“Strong holiday spending likely drove this growth. Indeed, a survey by Mastercard Spending Pulse finds that holiday sales rose 3.4% this year compared to 2018. Assuming they hold, annual growth rates came in a solid 6.40% for credit cards and 7.96% for unsecured personal loans,” Salem said.

Savings decreased 0.11% in December, representing a significant decline from 1.57% growth in November. Annual savings growth was a strong 8.22%. If the figure holds, it’ll be just below the 8.34% savings growth in 2018.

Certificates of deposit (CDs) grew 0.68% in December but registered an exceptionally strong annual growth rate of 20.20%. If this figure holds, it represents the strongest annual growth in CDs since 2005. While growth of share drafts decreased 2.68% in December (from 4.61% growth in November), the annual rate of growth was a healthy 8.23%.

“The monthly estimates show that credit union memberships grew 0.17% in December, slightly slower than the 0.14% monthly growth registered in November. If this figure holds up, credit union memberships will have increased 3.34% in 2019, the slowest annual membership growth since 2014,” Salem said. “Contributing factors include slowing economic growth and slower auto loan growth, which heavily influence membership growth rates.”