In distinction, lenders’ outlook for the following six months strengthened sharply and reached its highest degree since This fall 2024, with an NII of +20.6.
“Towards a fancy financial backdrop which noticed deterioration in labor market conditions along with an elevated, however stabilizing, tempo of inflation, client lenders reported weakening mortgage demand within the third quarter in comparison with the second quarter,” mentioned Tim Gill, AFSA’s chief economist and vp for analysis.
“Alternatively, Q3 actions by the Federal Reserve to chop short-term charges, together with the continuation of a downward pattern in long-term charges, contributed to an enchancment in lenders’ funding prices. Trying forward, indicators of easing monetary situations, together with further interest rate cuts, are fueling constructive expectations for each general and subprime mortgage demand and continued enchancment in funding prices.”
Twenty-one % of respondents reported an improved enterprise atmosphere, together with 5.9% who mentioned situations improved significantly. Against this, 26.5% reported deterioration, together with 5.9% who mentioned situations worsened considerably.
General mortgage demand fell, with 35.3% reporting a lower versus 23.5% reporting a rise. Subprime mortgage demand dropped extra sharply, with an NII of -22.2. As for mortgage efficiency, the general NII flipped to -8.8 from constructive readings in prior surveys. The subprime mortgage efficiency index dropped to -14.3, in comparison with +8.8 in Q2 2025.
AFSA’s report discovered that funding prices improved for the fifth consecutive quarter, with an NII of +42.2, up from +26.3 within the prior quarter.
Trying forward, 41% of respondents count on general enterprise situations to enhance over the following six months. One other 20.6% count on deterioration and 38% anticipate little change. Anticipated general mortgage demand rose to an NII of +26.5, whereas subprime demand is projected at +14.8.
Anticipated funding prices strengthened sharply, with an NII of +57.6, however anticipated mortgage efficiency slipped to -8.8 general and -44.4 for subprime loans.
“Indicators of client stress are evident within the third quarter outcomes, however lenders be ok with the course that the financial system is headed, pushed by a decrease rate of interest atmosphere,” mentioned Celia Winslow, AFSA’s president and CEO.
“The divergence between general and subprime mortgage efficiency expectations highlights the significantly difficult scenario of lower-income and higher-credit danger teams within the present and near-future financial atmosphere and are broadly in step with other measures of credit score delinquency.”
