Press Release

Credit Demand Recovers, Returning to Pre-Pandemic Levels

November 22, 2021

NEW YORK – The Federal Reserve Bank of New York's Center for Microeconomic Data today released results from its latest Survey of Consumer Expectations (SCE) Credit Access Survey, which provides information on consumers' experiences with, and expectations about, credit demand and credit access. The survey is fielded every four months, most recently in October 2021, and a press release summarizing trends from the past year is issued annually.

The latest Credit Access Survey reveals a sharp rebound in consumer credit demand in 2021, with most credit application rates rising and returning to 2019 levels. Application rates for credit card and credit limit increase requests showed the largest increases, especially among those with credit scores below 680. Application rates for mortgages grew solidly, surpassing both 2019 and 2020 levels. Application rates for mortgage refinances continued their spectacular post-2019 rise through the middle of 2021, after which they subsided somewhat. Application acceptance rates overall decreased slightly in 2021.

Looking ahead, households anticipate they will be more likely to request credit extensions for all credit types, (mortgages, credit cards, credit card limit increases, auto loans) except for mortgage refinancing. On average, consumers reported that they expect to be less able to cover a $2,000 emergency expense, while also reporting that the probability of them needing $2,000 for an unexpected expense increased somewhat.

Key findings from the survey over the past year include:

Experiences

  • Reported application rates for any kind of credit over the past 12 months rebounded to pre-pandemic levels over the course of 2021, after dropping by 11 percentage points to a series low in October 2020. The increase was broad-based across credit score and age groups, but largest for those with credit scores below 680 and those age 40 or younger and 60 or older. Overall, the average 2021 application rate of 45.6% was comparable to its 2019 level of 45.8%.
  • Reported rejection rates among applicants increased by 2.0 percentage points from 15.7% in 2020 to 17.5% in 2021, just below its 2019 level of 17.6%. The increase reflects the rise in applications by those with lower credit scores.
  • The average share of respondents who were too discouraged to apply for credit over the past 12 months (despite needing it) decreased slightly, falling from 7.0% in 2020 to 6.6% in 2021, just above the 2019 rate of 6.4%.
  • Considering applications and rejections experienced by respondents in the 12 months preceding each survey for specific credit types (credit cards, credit card limit increases, auto loans, mortgages, and mortgage refinancing), we find:
      • Application Rates

        • The application rate for credit cards rose throughout 2021, reaching 26.5% in October 2021, 10.8 percentage points higher than its October 2020 level, which was a series low. The increase was broad-based across age and credit score groups.
        • The application rate for credit card limit increases also rebounded from its October 2020 low of 7.1% to 11.3% in October 2021, just below its October 2019 level of 12.0%. The increase was broad-based across age and credit score groups.
        • Application rates for auto loans were slightly higher during 2021 than in 2020.
        • Continuing a rise observed in October 2020, application rates for mortgage refinancing increased further during 2021, moving from 24.6% in February to a new series high (post-October 2013) of 27.1% in June. By October 2021 the rate had ebbed somewhat to 21.4%. 
        • Mortgage loan application rates rebounded during 2021, increasing from 5.5% in October 2020 to 8.5% in October 2021. The average rate for 2021 overall was 8.0%, 2.1 percentage points above the 2020 average, and comparable to the 7.9% rate for 2019. The increase was driven by respondents with a credit score below 760 and those under age 60.
      • Rejection Rates

        • Reported average rejection rates for credit card and mortgage loan applications in 2021 exceeded those in 2020, while those for auto loan and credit limit increase applications instead declined slightly.
        • The average rejection rate for credit card applications during 2021 rose by 6.0 percentage points to 20.9%.
        • The average rejection rate of mortgage applications increased by 2.0 percentage points to 12.4% in 2021.
        • The average rejection rate on auto loans declined by 4.2 percentage point to 3.7% in 2021.
        • The reported rejection rate for credit card limit increases fell slightly from 33.6% in 2020 to 32.3% in 2021.
        • The average rejection rate on mortgage refinance applications remained stable at 9.9% in 2021, remaining well below the 24.1% rate seen in 2019.
        • Voluntary account closures for any type of credit decreased to 14.2% during 2021 from 16.6% in 2020 and 15.4% in 2019.

 Expectations

  • Responses regarding an unexpected expense suggested a slight increase in the subjective financial fragility of U.S. households. The average probability of needing $2,000 for an unexpected expense in the next month increased from an average of 31.8% in 2020 to 33.2% in 2021, while the average probability of being able to come up with $2,000 if an unexpected need arose within the next month decreased from 69.4% in 2020 to 68.2% in 2021.
  • The proportion of respondents who report that they are likely to apply for at least one type of credit over the next 12 months increased slightly, rising from 26.1% in October 2020 (and 26.3% for 2020 overall) to 28.9% in October 2021 (29.5% for 2021 overall). The increase was driven by those with credit scores below 760.
  • The average likelihood of applying for a credit card or credit card limit increase over the next 12 months rose from 8.3% and 5.8% in October 2020 to, respectively, 12.0% and 6.9% in October 2021. The increase for credit card applications was driven by those with a credit score under 760.
  • The average likelihood of applying for a mortgage also increased from 6.7% to 8.5%, an increase that was broad-based across credit score and age groups. The average likelihood of applying for an auto loan rose from 10.0% in 2020 to 11.5%. The average likelihood of applying for a mortgage refinance over the next 12 months reached a new series high of 14.2% in February 2021, but declined sharply since then to 8.7% in October 2021.
  • The average perceived likelihood of a credit application being rejected, conditional on applying over the next 12 months, was similar during 2021 as it was in 2020 for most loan types with the exception of credit card limit increase requests. The average perceived likelihood of a limit increase request being rejected increased from 37.7% in October 2020 (33.1% for 2020 overall) to 39.6% in October 2021 (37.3% for 2021 overall).

Detailed results are available here.

About the SCE Credit Access Survey

The SCE Credit Access Survey, fielded as part of the SCE, provides information on consumers' experiences and expectations regarding credit demand and credit access. Every four months, SCE panelists are asked whether they applied for credit in the past 12 months and the resulting outcomes. They are also asked about their expectations of applying for credit over the next 12 months and the perceived likelihood of those applications being accepted. This information is collected for five specific credit products: auto loans, credit cards, credit card limit increases, mortgages, and mortgage refinancing. Survey findings (in instances with sufficient sample sizes) are also presented separately by age and self-reported credit score subgroups. A press release summarizing trends from the past year is issued annually.

More information about the SCE survey goals, design, and content can be found here.

Contact
Shelley Pitterson
(917) 698-0510
shelley.pitterson@ny.frb.org

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