WASHINGTON -- Business loan demand continued to rise during the last three months while demand for key consumer loans, such as mortgages, dropped off, according to the Federal Reserve's latest survey of bankers released yesterday.

"Demand for business loans increased over the last three months at a significant fraction of respondent banks, although slightly off the record numbers reported in the May survey," said the Fed's senior loan officers survey, which covers May, June, and July.

Meanwhile, "demand for credit from households was mixed across types of credit: demand for mortgages declined significantly; demand for home equity lines of credit declined slightly, on net; and demand for consumer installment loans went up," said the survey, which included responses from 58 domestic banks and 18 branches of foreign banks operating in the United States.

Half of the domestic banks surveyed said they experienced "moderately weaker" demand for residential mortgages in the last three months compared to the previous three months, the survey said.

The previous survey, released May 20, also showed surging demand for business and consumer installment loans, accompanied by sagging demand for home mortgages.

Bankers also continued to make loans more available over the last three months, the August survey found.

"The results show a continuation of the easing of terms and standards on loans to both businesses and households found in the last several surveys, although at a somewhat diminished pace," the survey said.

Banks eased their lending standards for all sizes of companies but primarily for middle-sized companies, the survey showed. The bankers also reported a slight easing of terms for commercial real estate loans, as was the case in the February and May surveys, the Fed said.

"Also, for the first time since late last year, several banks reported tightening standards," the survey said.

Bankers also reported easier terms on loans to individuals. "Respondents reported an increased willingness to make loans to individuals and, on net, a slight easing in standards for home mortgage loans," the survey said.

About a fifth of the survey's respondents indicated that they eased their terms for consumer installment and home equity loans over the last three months, the survey said.

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