On the commercial and industrial loan front we see that the number of institutions tightening their lending standards is still increasing, but at a far lower rate. At the end of last year/beginning of this year 80% of respondents were tightening their lending standards; currently that number is around 20%. In addition, the percentage of banks increasing their spreads is still increasing but at a lower rate. At the end of last year/beginning of this year that percentage was near 100%; now it's around 40%. However, loan demand is still negative. In other words, institutions are becoming more accommodating. The main issue with C and I loans is demand.
In general we see the same pattern with consumer loans. While the percentage of institutions tightening their lending standards is still increasing, the percentage is decreasing. At the end of last year/beginning of this year about 60% of banks were tightening their standards; now that total is near 20%. At the end of last year there was a noted lack of interest in making consumer loans; now that total is near 0%. However, note that since the beginning of 2006 we've been seeing a weaker consumer loan demand.
On the residential mortgage front notice the large drop in the number of institutions tightening their lending standards; we've seen a drop from right around 100% of institutions to about 20% now. Also note the increase in mortgage loan demand. While the loan demand was negative for the first part of this year it has picked up. Although still negative for sub-prime mortgages we are seeing a positive performance from the prime market.Where this report tells us is the following: lenders are loosening standards to attract loans. The main issue is loan demand.
