Banks Tightening Lending Standards for Commercial Real Estate in Q2

Loan officers at U.S. banks reported tightening lending standards on commercial real estate loans as terms for business loans remain mostly unchanged, the Federal Reserve reported in July in a quarterly survey. The officers surveyed also reported a decline in demand for both types of loans in the second quarter.

“A moderate net fraction of banks reported tightening standards for construction and land development loans and loans secured by multifamily residential properties” in commercial real estate, the U.S. central bank said in its survey.

Several Fed policymakers have warned that a run-up in commercial real estate prices could increase the intensity of any future economic downturn. The Fed also placed a bigger emphasis this year on commercial real estate when it performed its annual “stress tests” in order to determine how well big banks could potentially weather financial turmoil.

Some banks also reported a tightening in auto and credit card lending standards, with demand in that category also declining. The Fed surveyed loan officers at 76 domestic banks and 22 U.S. branches and agencies of foreign banks.

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Banks Tightening Lending Standards for Commercial Real Estate in Q2

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