Lending Standards Remain Tight. Weak Consumer Demand to Stall Recovery?

Banks were still tightening loan standards and consumer demand for loans remained soft during the second quarter, a central bank survey showed yesterday.

“Domestic banks indicated that they continued to tighten standards and terms over the past three months on all major types of loans to businesses and households,” the Federal  Reserve’s survey of senior loan officers said.

Major loans include commercial and industrial loans, commercial and residential mortgages, and consumer loans.

In the the residential prime mortgages category 22% of banks reportedrntighter lending terms. In the commercial mortgage sector 46% of banksrntightened credit. Business and consumer lending fell in the middle,rnwith further tightening reported by about 35% of lending institutions.rnAlthough banks are still reluctant to lend, relative to the Jan-Aprilrnsurvey, all categories showedrnimprovements.

Only one category reported greater demand in the month, and that was for prime mortgages â€