MNI POLICY: U.S. Credit Access, Demand Plunge- NY Fed Survey

American feelings about being able to handle an unexpected expense reached a record low while demand and access to credit deteriorated, a Federal Reserve Bank of New York survey on Monday showed.

Application rates for any kind of credit dropped to a new series low in the latest figures covering October. The most recent rate of 34.6% is down 11 percentage points since the pandemic struck.

Application and acceptance rates for credit card and credit limit increase requests showed the largest declines, followed by auto loans. Yet, application and acceptance rates for mortgage refinances continued to surge through 2020, with primarily high credit score borrowers taking advantage of lower mortgage rates.

The survey -- done every four months -- found rejection rates increased 3.8 percentage points to 18% since February. The average 2020 rejection rate of 15.7% was still slightly below its 2019 level of 17.6%.

The share of respondents too discouraged to apply for credit over the past 12 months rose from 6.9% in February to 7.2% in October.

Looking ahead, households generally lowered their expectations during 2020 regarding applying and receiving credit over the coming year, the Fed said.

The survey also found that since February the average probability of respondents being able to come up with USD2,000 if an unexpected need arose within the next month dropped sharply, reaching a new series low of 65.6% in October.