How Mortgage Apps Impacted Nonrevolving Credit

Nonrevolving credit, as well as debt, is rising according to an analysis of the latest Federal Reserve Consumer Credit report by the National Association of Home Builders (NAHB).

Citing the report's data, the NAHB analysis said that consumer credit increased at an annual rate of 4.5 percent. This included a rise in revolving credit (for loans such as home equity lines of credit) at an annual rate of 3.3 percent and nonrevolving credit (loans such as mortgages) at a rate of 5 percent annually.

Nonrevolving debt also grew at 6.1 percent during the period, the analysis revealed, even though there was a "significant downward revision to nonrevolving debt" by the Federal Reserve moving forward. The current, outstanding level of debt on a seasonally adjusted basis is $4 trillion, approximately $15 billion higher than the previous month’s outstanding balance.

The analysis pointed out that while mortgage applications had increased over the past few weeks, they were not likely to impact the data on nonrevolving credit. This was because "instead of resulting in new mortgage originations, the lion’s share of activity was in refinancing."

The weekly MBA mortgage applications survey had shown a surge in home refinancing, with a week-to-week increase of 39 percent on a seasonally adjusted basis. The analysis revealed that "despite the widespread decrease in mortgage rates, changes in purchasing activity were not as sensitive to the drop as were applications to refinance."

However, the analysis revealed that this was more due to the seasonality of loans during this period rather than any other external factors. The data in February followed the usual seasonal decrease in consumer credit, "that has historically occurred during this time of the year."

The analysis said that from January 2019, the non-seasonally adjusted level of debt reduced by about $15 billion, with depository institutions’ holdings accounting for most of the decrease. Within depository institutions, "the non-seasonally adjusted decrease in debt was largely in revolving credit."