According to new reports released by the Federal Reserve, banks in the US are beginning to make loans more readily available to consumers. Over the past three months, there was an increased demand from businesses and consumers for lending. In turn, domestic banks have started to ease their lending standards on many types of businesses and consumer loans, including commercial real estate, commercial and industrial loans for firms of all sizes, credit cards, auto loans, and other consumer loans. With loosened standards, it will be easier for consumers to get certain loans that they need.
The report suggests that loosening the lending standards predicts stronger economic growth. In the past, especially during the recession, lenders had tight restrictions on borrowing to reduce their financial risk. By loosening the standards, lenders are creating a new opening for consumer and business borrowing. This change towards greater opportunities and more financial risk indicates that the economy is doing better and will only continue to grow. As stated in the Federal Reserve report, economic growth is supposed to pick up from 2.8% to 3.2% this year. Banks have also reported an improved outlook for 2014.
With the bank’s ease on lending and increased demand from consumers, it looks like the economy may finally be headed in a positive direction.
Source: Bloomberg
