Home Uncategorized Loans fell, membership and savings balances rose in January

Loans fell, membership and savings balances rose in January

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Credit unions are seeing a sharp declines in consumer installment credit balances as a growing number of Americans focus on deleveraging.

That’s according to the latest Credit Union Trends Report from CUNA Mutual Group, which notes that January saw a 0.9% decline in consumer installment lines, such as auto, credit cards and unsecured loans. Those same lines experienced a 0.1% rise in January 2020.

Overall, credit union loan balances were up just 5.3% during 2020, the slowest pace in eight years and down from the 6.5% growth rate seen in 2019, CUNA Mutual said. The company is forecasting loan growth of just 5% for 2021, followed by 8% growth the following two years.

Credit card balances fell 3% in January, significantly below the decade-long trend of a 1% drop in January. Much of that decline is the result of members paying down high-rate credit card debt with funds from cash-out mortgage refinancing, the study found.

New auto loan balances for the month were also down by 0.6%, below the 0.3% decline seen in January 2020. On a seasonally-adjusted annualized basis, new-auto loan balances fell at a 4.7% pace in January — a significant deceleration from the last few years, according to CUNA Mutual.

Along with borrowers paying down loans with stimulus funds and money obtained through cash-out refis, CUNA Mutual attributed the poor lending performance to rising insecurity in the jobs market causing potential borrowers to be hesitant to take on new debt.

On the plus side, membership could be on the rebound thanks to growth in the job market.

CUNA Mutual reported 378,000 new memberships in January, a 1.8% improvement over the growth recorded the previous January. The company pointed to data from the Bureau of Labor statistics that the economy added 166,000 jobs during January, though that’s far below the 315,000 added in January 2020.

Savings balances rose 0.9% in January, largely as a result of members depositing $600 economic impact payments from the government into their checking accounts. However that figure was still below the 1.2% savings growth reported at the start of last year.

“We expect exceptionally strong savings growth at credit unions in 2021, due to additional $1,400 stimulus checks being sent out this spring. So, with savings balances rising 20.3% in 2020, we expect credit union deposits to increase another 15% this year,” CUNA Mutual said in the report.

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