WASHINGTON While lending activity remained strong overall, demand for residential mortgages fell in several U.S. regions in the last six weeks, according to a Federal Reserve Board report issued Wednesday.
A case in point was the Federal Reserve Bank of St. Louis, which said in the report that real estate loans in its region continue to be hit hard, as demand for new homes falls. One contact indicates, for example, that residential real estate loans at a sample of banks in one region are off by almost one-half in volume and 40% in value this year when compared with last year.
Residential mortgage lending also slipped in the Philadelphia, Cleveland, Atlanta, and New York areas.
These economic snapshots were included in the Feds Beige Book, a periodic survey of the central banks 12 districts. The Federal Open Market Committee considers the report when making interest rate decisions. The policymaking panel is next scheduled to meet Oct. 3.
Weve seen a lot of talk recently that not only is the Fed done raising interest rates, which probably is true, but they may ease them, said Wayne M. Ayers, chief economist at FleetBoston Financial Corp. I dont see that happening for a long time. While the growth of the economy has slowed from 5% to 3.5%, it still is decent-sized growth, and the slowdown isnt enough to make the Fed do an about-face.
Seven districts reported that commercial loan demand was strong, while only the New York Fed said there was a substantial decrease. The St. Louis central bank said that commercial loan demand was steady, but reported that the average loan size was shrinking. No figures were given.
Several regions said that slow deposit growth continues to plague many banks as competition increases and consumers turn to alternatives to achieve a higher return.
On the deposit side, demand deposits, NOW accounts, money market deposit accounts, and small time deposits all declined, the Kansas City Fed reported. Some rural bankers attributed the deposit decline to increased competition from mutual funds, the availability of funds from alternative sources such as the Federal Home Loan Banks, and long-term demographic shifts.
Related Content Online:
