Credit union loans grew in January at their fastest rate in 17 years, led again by loans for cars and businesses, according to a CUNA Mutual Group report released Tuesday.
Credit union loans grew 12.8% in January 2017, the highest seasonally-adjusted annualized rate since January 2000, according to the monthly Credit Union Trend Report.
Chief economist Steven Rick said the credit boom could extend into a fourth year of double-digit growth in 2017 because membership has been growing more than 3% a year for the past three years.
Credit unions added 338,000 new members in January, up from 201,000 in January 2016. Total credit union memberships reached 110.0 million in January 2017, up 4.8% from a year ago. Credit union membership is expected to surpass 113.4 million by year’s end.
Total credit union assets rose 0.7% to reach $1.3 trillion in January, above the 0.6% gain reported in January 2016. Assets grew 7.5% during the past year due to a 7.4% increase in deposits, a 15.1% increase in borrowings, and a 6.5% increase in capital.
Loan portfolios grew 0.9% to $901.1 billion in January, more than double the 0.4% pace reported in January 2016. Loan balances have grown 11.5% in the past year.
Member business loans remained less than 8% of credit unions’ portfolios, but were again the fastest growing loan segment, rising 20.9% in the past 12 months to reach $68.5 billion in January.
Car loans showed unusual strength. Used auto loan balances rose 15.8% in January on a seasonally-adjusted annualized basis—“a rapid acceleration from just six months ago and the fastest pace since January 1997,” Rick said.
CUNA Mutual Group expects U.S. auto sales to exceed 17.8 million units in 2017, slightly more than the record 17.5 million pace set in 2016 due to improving household financial health. On Tuesday, Ford announced it will invest $1.2 billion in Michigan to increase the production of trucks and sport utility vehicles.
“Auto sales should reach their peak this year as pent-up demand from the Great Recession becomes satiated,” Rick said. “Factors supporting auto sales include: attractive discounting, low gas prices, ample access to credit, low debt burdens, strong job growth, and growing hourly earnings.”
Housing also remains strong. Credit union first-lien mortgage originations reached a record $143.2 billion in 2016, up 13% from 2015.
The contract interest rate on a 30-year fixed-rate conventional home mortgage fell to 4.15% in January, from 4.2% in December, but higher than the 3.87% reported in January 2016. Rick predicted mortgage interest rates would rise to 5.75% by 2019 as the 10-year Treasury bond interest rate approaches its long-run equilibrium average of 4%.
Even with rising interest rates and home prices rising a further 5% to 6% in 2017, he expects healthy household finances will lead to more homes being bought. “Furthermore, rising rents are tilting the rent-versus-buy calculation more and more in favor of purchasing,” he said.
