WASHINGTON-Despite savings growing at their slowest pace in five years and loans demonstrating their second strongest quarter in the same period, savings growth has outpaced loan growth the last two months. CUNA's Monthly Credit Union Estimates for the month of March found that while loans were up 0.6%, savings grew 0.9%. CUNA Chief Economist explained that this is mostly a seasonal phenomenon. However, he added, "It maybe a little bit of credit unions not having raised their dividend rates as much as the market has gone up." Leading among the savings vehicles were regular shares up 1.5% and certificates up 1.3%. Additionally, CUNA's data showed money market accounts up 0.5% and Individual Retirement Accounts up 0.4% in the month of March. On the other hand, share drafts fell 0.2% during the month. The lending side of the balance sheet had adjustable rate mortgages leading loan growth at 1.7%. Hampel said that the lengths buyers will go to in order to afford a mortgage is more a reflection of the housing prices approaching their peak. With ARMs, borrowers can get approved for a much larger mortgage than a fixed rate because the lender looks at the debt-to-income ratio of the original payments, not what they can become after a couple of years when the rate is no longer locked. Particularly considering the annual percentage cap on ARMs, "People are more averse to ARMs than they should be," the economist stated. Home equity loans increased 1.2%, new auto loans rose 0.9%, used auto loans increased 0.4%, fixed-rate first mortgages rose just 0.3%, and other mortgages were up 0.2%. Credit card loans and used car loans were down 0.6% and 0.4%, respectively. At the same time, delinquencies fell to 0.6% in March as compared to 0.7% in February. The statistics suggest that credit unions may be being too conservative. "I always think that.Not all credit unions, but a lot of credit unions should review their lending policies," Hampel said; they could be passing up good opportunities. While Hampel said that the 0.6% "is the lowest delinquency rate we've ever recorded," he emphasized it is not a "gross" under-risk-taking by credit unions. Hampel speculated that the new bankruptcy reform law could bring credit unions somewhat out of their conservative lending shell because they will have less to worry about from abusive bankruptcy filings. With March being the second month in a row that credit union savings growth outpaced loan growth, the average loan-to-share ratio was down to 73.5% for March. -

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