Lending Industry in 2021 & Forecasts for 2022 - Small Study of Pennsylvania Association of Mortgage Brokers


According to the Ministry of Economics and Infrastructure of Pennsylvania, banks granted new loans amounting to 11.9 billion dollars in the first four months of this year. It is 24.8% more than the respective period last year, informs the National Debt Company of PA.

Of the total number of loans granted, the largest share (22.9%) belongs to loans directed in the trade sector, followed by those for the purchase/construction of real estate (18.1%). About 17.2% are intended for consumption, 8.2% for agriculture, 7% for the food industry, etc.

According to the data, the most significant increase was registered in the loans granted for the purchase/construction of the buildings, the volume of which increased compared to April 2020 by 30.9%.

Also, the balance of loans to the agricultural sector increased by 24.2%, which is most likely explained by implementing the Interest Subsidy Program for bank loans contracted between 01.05.2021 - 31.11.2021 under budgetary measures to support the agricultural sector affected by natural disasters.

A significant share of new loans (63.6% of the total volume) was granted to legal entities, which increased by 7.6% compared to the first four months of 2021, and the volume of new loans granted to individuals increased by 1, 7 times. They requested the provision of consumer loans (61%), real estate loans (28.9%), and other purposes (10.1%).

The balance of loans in the economy marked an increase of 13.4% compared to the level recorded at the end of April 2020, amounting to 51 billion dollars.

At the same time, in January-April 2021, new deposits were attracted for 53.1 million dollars, 4.7% less compared to the respective period last year.

Optimistic Forecasts - Consumer loans and mortgages, cheaper in 2022

Consumer and mortgage loans will be cheaper next year. According to experts, lower inflation and Central Bank policies will be the main factors that will lead to more affordable loans. The appearance of new lending companies will lead to the creation of competition. The banking institutions will have to create attractive offers to avoid losing their clients, say the economic experts.

Last year, interest rates on loans steadily declined for both individuals and legal entities. If at the beginning of the year the interest rate was 11.42 percent, then at the end of the year, it reached 9.85 percent. It was down by almost two percentage points.

And the interest rate on loans for individuals decreased to 9.94 percent, compared to 11.72 percent in January 2020. The National Bank of Pennsylvania data show that in November 2020, the loan portfolio amounted to 33 billion 406 million dollars. Most loans worth 9.5 billion dollars were offered in the field of trade. 4.1 billion dollars were offered by commercial banks for consumer loans.

Richard Simon, a mortgage expert, says that it will either continue or continue to fall this year. Another important indicator is the inflation rate, which is again expected to fall this year. If both indicators fall, this will inevitably lead to a decrease in the rate for the means offered by the commercial banks. Simon claims that the country lacks competition between commercial banks, which causes financial institutions to ask for more money for the services offered.

There are also optimistic forecasts for mortgages. Compared to last year, the number of mortgages is higher than in the previous three months, practically at 60-70 percent. If the situation remains stable, the rate will be low, but it will decrease. We will have one of the lowest inflation rates. It is a plus that can reduce the loan rate.

The news made people happy. But not everyone is ready to take bank loans. The data published by the Pennsylvania National Bank show that the most affordable are the loans granted for terms of up to one month. Their interest for legal entities is 12.24 and for individuals 13.46 percent.

© 2021 by PAMB.

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