Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Nov 1, 2012

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Yesterday the Federal Reserve reported that U.S. banks have seen an increase in demand for car loans and commercial and residential mortgages during the third quarter.

According to Ward’s Automotive Group, cars and lightweight trucks sold at a 14.9 million annual pace during September, the highest since March 2008. Similar growth was seen in the home sector. According to last week’s Commerce Department report, new homes sold at a 389,000 annual pace during September—the largest pace in two years.

“Significant fractions of banks reported a strengthening of demand for commercial real estate loans, residential mortgages, and auto loans, on balance,” the Federal Reserve said in its October survey of senior loan officers. “Demand for most other types of loans was about unchanged.”

There is further evidence from the report that auto and home sales are helping to fuel the U.S. economic recovery. The sales boost is provided by record-low interest rates on car loans and mortgages. The U.S. central bank has reduced interest rates on various loans, including car loans, to nearly zero. Additionally, last month it announced a third round of “qualitative easing” to further reduce borrowing costs. All of these efforts are in the hopes of encouraging businesses to hire and invest in more American employees.  

The quarterly survey of 68 domestic banks and 23 U.S. branches and agencies of foreign banks also examined other sectors of the economy. The Federal survey illustrated that while home and car loans are increasing, the standards for real-estate divisions remained unchanged. Adolfo Laurenti, deputy chief economist at Mesirow Financial Inc, said the decision to ease standards for some areas has “been schizophrenic.”

“On the one hand we want banks to resume lending and make the economy stronger but on the other hand we want banks to reduce risk exposure, have more vanilla contracts, higher capital requirements and so on,” Laurenti said to Bloomberg.

Some U.S. banking officials have been overwhelmed by the slow-rebuilding economy. Unemployment levels remained at around 7.8 percent, the same as in September. Analysts credit a lack of credit for small businesses as a main factor for the unchanged levels. Other analysts critique a lack of credit-worthy borrowers as the main reason for stagnant results.

Ellen Zentner, a Nomura economist, blamed the results on a business fear. She told Reuters, “The lack of pick-up in demand for commercial and industrial loans is a reflection of a reluctance to hire amid heightened business uncertainty.”