Consumer Credit Crunch: Americans Gear Up For Tougher Lending Standards

Zinger Key Points
  • Consumer credit confidence dips, with 68% expecting tougher borrowing conditions ahead.
  • A Fannie Mae survey revealed that 58% of respondents believe obtaining a home mortgage would be challenging.

American consumers are bracing for a tighter credit environment, expecting more stringent lending criteria in the near future. This anticipation comes as major credit companies move to adjust their fee structures, potentially impacting consumer spending and the broader economy.

What Happened: The Federal Reserve Bank of New York released findings on Monday, revealing a significant portion of the population bracing for harder times in securing credit. A net 68% of survey respondents foresee more difficult credit conditions over the next twelve months, Bloomberg reports.

This figure marks the highest level of consumer pessimism regarding credit access in four months, and is slightly lower than the 70.4% recorded a year prior.

See Also: Larry Summers Says There’s Still A ‘Real Possibility’ Of A Fed Move Higher ‘Would Be An Inappropriate Act To Cut Rates’ At June Meeting

Meanwhile, a Fannie Mae survey revealed that 58% of respondents believe obtaining a home mortgage today would be challenging, marking a 4% increase from February and the most significant monthly rise since September. This perception of difficulty has risen by 6% compared to last year.

This persistent concern over tightening credit standards underscores the potential for a deceleration in loan growth, which historically has been linked to broader economic downturns, according to Bloomberg.

Why It Matters: The apprehension among U.S. consumers regarding credit access comes at a time when major credit card companies like Mastercard Inc. MA and Visa Inc. V are making significant changes to their fee structures.

Mastercard announced an increase in specific credit card fees starting April 15, following a $30 billion settlement with Visa over swipe fees. This move is expected to impose additional costs on retailers, which could trickle down to consumers.

The Merchants Payments Coalition reports that the network “assessment” fee is set to rise from 0.13% to 0.14%, leading to an extra $259.1 million in fees, given last year’s transactions surpassed $2 trillion.

This development could further tighten the credit landscape, affecting consumer spending behavior and potentially contributing to the economic slowdown anticipated by the surveyed consumers.

Read Next: Jamie Dimon Warns Of Stickier Inflation, Higher Interest Rates In Annual JPMorgan Letter: ‘There Will Be Plenty Of Stress’

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo: Shutterstock

Market News and Data brought to you by Benzinga APIs
Posted In: Econ #sTop StoriesAI Generatedcreditcredit cardsfannie maeFederal Reserve Bank of New YorkStories That Matter
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!