Lending opportunities could increase as CUs look to “survive ‘25”

Lending opportunities could increase as CUs look to “survive ‘25”

Following sharp increases in recent years, interest rates are expected to gradually decrease in 2025, and that could be good news for credit union loan portfolios.

While lower rates could pressure credit unions’ profit margins—potentially leading to tighter profitability—such moves typically foster business growth and increase demand for commercial loans, said John Holt, CEO of $690 million-asset Nutmeg State Financial Credit Union in Rocky Hill, Connecticut.

Holt told Tyfone that if credit unions can manage risk effectively and sustain their margins in this lower-rate environment, “2025 could offer an opportunity to expand loan offerings and strengthen member relationships.”

As for residential mortgage lending, which is a key component of CU lending programs, forecasts are that the 10-year treasury will decrease in 2025, eventually taking mortgage rates down by 100 bps to around 6%.

So, mortgage volumes are expected to increase around 16%-19%, Jim Adkins, Managing Partner of Artisan Advisors, told Tyfone.

“The good news for CU savers will be continued higher interest rates for savings accounts and CDs,” Adkins said.

Kendall Garrison, CEO of $1.3 billion-asset Amplify Credit Union in Austin, Texas, said in a LinkedIn post that after years of wild swings, the housing market is set to stabilize this year, with the median sales price holding above $450,000.

Buyers and sellers can finally expect a more predictable market, and homeowners can feel secure in their investments, he said.

Additionally, borrowing will get cheaper in the second half of the year, with the Fed switching gears and likely announcing three rate cuts in 2025.

“Whether you’re looking to buy a home, finance a car, or consolidate debt, these cuts mean better rates and more breathing room,” Garrison said.

But Adkins from Artisan said that to increase loans and deposits, credit unions must first increase membership. So effectively communicating the value of belonging to a credit union is key.

“This can be a challenging task when the potential customer is unaware of the advantages of CU membership, and this is especially true with younger, tech-savvy customers whose focus is on online and mobile services and don’t utilize a traditional branch,” Adkins said.

At the same time, credit union loan balances, which grow on average 8% per year over the long run, are only rising at a 1.8% seasonally-adjusted annual rate today, the slowest pace since 2011, according to a new report from TruStage.

However, as short-term interest rates fall at least 50 basis points in 2025, the firm that was formerly known as CUNA Mutual Group is forecasting credit union loan growth to rise to 6%.

Matt Selke, president and CEO of $147 million-asset Georgia Heritage Federal Credit Union in Savannah, Georgia, told Tyfone 2025 will be the year of refinances on everything from homes to autos and everything in between. 

“Loans made during the peak rate period of 2023 and 2024…those folks will probably be looking to refinance to a lower rate and will be fair game to go after as I think lending will be slow,” Selke said.

The real question might be whether or not the U.S. will see an economic slow down or recession. Selke said 2025 might just be the year of slower growth but with stabilization. 

“A lot of folks in the industry are using the slogan ‘survive ’25,’ which in some ways is true,” he said. “Balance sheets got out of whack after the 500 bps increase in 18 months in 2023 and 2024 and won’t be back in balance until 2026.”

A lot of money is locked up in lower-rate investments made in 2020 and 2021, so the industry will have a lot more cash on hand in 2026 to lend out at better rates, Selke added. 

Adkins said another key is digital transformation, which includes investing in technology to improve digital banking services. And that includes mobile banking apps, online loan applications, and automated customer service tools such as chatbots.

Also, diversification of services and partnerships with fintech companies to enhance technology and products will help set forward-thinking credit unions apart from the pack this year.

“Customers want convenience and technology, so the ability of credit unions to offer robust online and mobile banking services is crucial,” Adkins said. “Also, using data analytics to find opportunities both within a CU’s membership base and in the pursuit of new members can be a differentiator.”

Portland, Oregon-based Tyfone is a leading provider of consumer and commercial digital banking services for community financial institutions. At Tyfone, we believe that as credit unions of all sizes continue to look for lending opportunities, adopting cutting-edge digital banking technologies becomes crucial.

Originally Appeared Here

About Caroline Vega 388 Articles
Caroline Vega combines over a decade of digital strategy expertise with a deep passion for journalism, originating from her academic roots at Louisiana State University. As an editor based in New Orleans, she directs the editorial narrative at Commercial Lending News, where she crafts compelling content on commercial lending. Her unique approach weaves her background in finance and digital marketing into stories that not only inform but also drive industry conversations forward.