18 July 2023
Bank credit becomes increasingly difficult to obtain as rejection rates reach record highs, according to a report by the New York Fed. The overall rejection rate for credit applicants has risen to its highest level since June 2018, reaching 21.8%. This trend is seen across different age groups, particularly impacting those with credit scores below 680. Auto loan rejection rates have also hit a record high, standing at 14.2%, while rejection rates for credit cards and credit limit increases have also increased. The housing sector is severely affected, with mortgage rejection rates at 13.2% and mortgage refinancing rejection rates at 20.8%. The data indicates a pullback in loan applications, with only 40.3% of respondents seeking loans in June, the lowest level since October 2020. However, respondents planning to apply for credit over the next year have seen a slight increase. These trends coincide with the Federal Reserve’s aggressive interest rate hikes to combat inflation, making credit harder to obtain. The housing market has been significantly impacted by rising rates, leading to decreased borrowing and reduced mortgage demand.