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Credit Union Loans Remain Hot as Rates Stabilize

Credit Union Loans Remain Hot as Rates Stabilize

Consumers have taken rate hike warnings to heart, as a growing number of borrowers headed to a credit union for a loan in 2013.

For the first time since 2007, the Credit Union National Association (CUNA) reports that loans have outpaced savings increases, rising 6.8% in 2013.

This hike was up from 2012’s growth of 4.8% and Steve Rick, CUNA’s senior economist says that auto loans led the charge. "Credit union members were in a car-buying mood with new auto loans and used auto loans up 10.9% and 8.9%, respectively," he said in a release.

Rick predicts this growth to continue well throughout 2014, citing balances to increase by 7%. "Expect households to release pent-up demand for autos, furniture and appliances over the next two years," he said.

Auto and Mortgage Rates Are Low

30 year-fixed rate mortgages are averaging 4.23% continuing a downtrend during 2014. Auto loans are average below 3% for 48 month terms on new autos. As rates continue to remain well below 5%, consumers will continue to head to a credit union to obtain financing at some of the lowest rates in history.

Regionally, examples of loan growth were evident in Wisconsin as the state’s credit unions reported a 7.2% growth. Also, the League of Southeastern Credit Unions (LSCU) reported that credit unions in Alabama made $187 million in new loans from second quarter to third quarter and credit unions in Florida generated $753 million in new loans from second quarter to third quarter.

In a release, LSCU & Affiliates President/CEO Patrick La Pine said that there’s no denying consumers’ thirst for credit union loans. “You can clearly see over the past three years more consumers are looking for loans. Credit unions have been a great position to help their members purchase new and used autos, as well as new homes. Member business loans have picked up over the past 10 quarters as more businesses recognize credit unions want to help them grow their business.”

Individual credit unions like Redwood Credit Union (Santa Rosa, CA) experienced increases across the board, specifically in the area of real estate lending. Overall loans rose by 10.2% to $1.61 billion, with real estate loans increasing by 13.9%. Business loan growth was robust as the credit union made 843 business loans in 2013, an increase of 6%.

“Both businesses and consumers have reset their finances,” Brett Martinez, president and CEO told the North Bay Business Journal. “It’s a combination of refinancing existing debt and investing in the future.”

Credit Union Savings Remain Anemic

As the country digs out of the recession, consumers continue to re-group through lending rather than credit union savings vehicles. CUNA said that savings balances dropped from 6.1% the year before to 4.3% in 2013. Balances also decreased, tumbling 0.1% in December versus a 0.9% increase in November. Rick notes that products like short-term certificates and money market accounts were one area that increased whereas share drafts, regular shares and individual retirement accounts dipped.

"On the savings side of the balance sheet, members continue to look for safe, short-term liquid deposit accounts," Rick said. Whether you are looking for a loan, money market, certification or transaction account, a credit union may be your best bet.

By Gina Ragusa
Published February 12, 2014
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