CUs see mortgage refinance/purchase boom in July

MADISON, Wis. (9/3/10)--Recent record-low mortgage interest rates caused a mortgage refinance and purchase boom at credit unions in July, according to a Credit Union National Association (CUNA) economist's analysis of CUNA's monthly review of credit unions.

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Credit union loans outstanding decreased about 0.1% during July, compared to a 0.3% increase during June 2010. Fixed-rate mortgages led loan growth, rising 0.8%, followed by unsecured personal loans and credit card loans, which went up 0.7% and 0.6%, respectively. Used-auto loans grew 0.5%, while home equity loans increased 0.1%. Adjustable-rate mortgages and new-auto loans decreased 0.1% and 1.4%, respectively. Credit union loans in July totaled $581.9 billion, compared with $586.2 billion in July 2009.

"Credit union loan balances fell again in July," Steve Rick, CUNA senior economist, told News Now. "That was the seventh monthly decline over the past nine months. Loan balances fell 1% since the start of the year.

"However, recent record-low mortgage interest rates have caused a mortgage refinance and purchase boom at credit unions," he said. "Fixed-rate first-mortgage balances, which was the fastest growing loan product, rose 0.75% in July."

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Credit union savings balances rose 0.8% in July, compared with a 0.3% decrease during June. Share drafts rose 4.8%, followed by money market accounts (up 0.8%) and regular shares (up 0.4%). One-year certificates and individual retirement accounts decreased 0.3% and 0.5%, respectively. Credit union savings in July totaled $801.5 billion--or $43.2 billion more than the $758.3 billion saved in July 2009.

"Credit union savings balances rose $6.2 billion, or 0.8%, in July to break the $800 billion mark," Rick said. "During the past 12 months, savings balances are up 5.7%, down from 9.8% reported for the comparable period one year earlier. Credit union members are choosing to pay down debt as they accumulate any surplus funds, as well as building up their precautionary savings balances."

Credit unions' 60-plus-day delinquencies increased slightly to 1.8% during July. "Credit union loan delinquency rates appear to have leveled off over the past three months around 1.75%," Rick said. "This is off the recent high of 1.85% reported in January. Loan charge-offs and a slightly better labor market are the two main factors bringing down the loan delinquency rate."

Credit unions' loan-to-savings ratio remained at 73% in July. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--remained at 19%.

The movement's overall capital-to-asset ratio remained at 10% in July. The total dollar amount of capital is $92 billion.

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