CFPB: Credit Applications Returning To Pre-Pandemic Levels

Consumer applications for mortgages, car loans and revolving credit cards had essentially returned to pre-pandemic levels by May, a new report from the Consumer Financial Protection Bureau (CFPB) has found.

According to the CFPB, prime and near-prime consumers are the key drivers for this recovery, with applications from sub-prime and deep sub-prime borrowers still low for all types of credit, except for super-prime borrowers, who are still seeking mortgages.

“While consumer credit applications have generally recovered to pre-pandemic levels in the aggregate, we see important differences across consumers,” said Acting CFPB Director David Uejio. “We will continue to keep a close watch on the marketplace as the economic recovery continues, to help ensure all consumers have access to financial products and services that are fair, transparent and competitive.”

Some of the key findings of the federal agency’s report include:

• Inquiries into auto loans dropped by 52 percent by the end of March of last year, and returned to their pre-COVID level by January 2021.
• New mortgage credit inquiries dropped in March 2020 by a smaller margin than other types of inquiries, followed by a surge. These inquiries then surpassed their usual, seasonally-adjusted volume by 10 to 30 percent, “reflecting the unusually high activity in the mortgage market throughout the pandemic.”
• The longest recovery involved revolving credit card inquiries, which took a full year — from March 2020 to March 2021 —to return to their normal levels.
• Consumers with deep sub-prime scores saw the largest fall in auto loan inquiries compared to past years.
• Changes in auto loan and mortgage applications differed from state to state, while credit card applications were more consistent.

These findings are in keeping with recent figures from Equifax, which found demand for auto loans and leases, personal loans and credit cards rising by 39 percent year over year from April 2020 to April 2021, and up 11 percent compared to April 2019.

During the pandemic, consumers, by and large, weren’t interested in credit cards or loans, either due to fears about borrowing during uncertain times, lack of need due to stimulus payments and extra unemployment, or a healthy stock market.

With people becoming vaccinated, people are spending more on things like cars, vacations and dining. There’s also been a spike in car prices, which has spurred the need for loans.