MADISON, Wis.—Credit unions are seeing loan activity recover as easing interest rates and improving liquidity fuel lending, according to TruStage’s Q3 2025 Trends Report.
Loan growth across the movement reached 3.9% over the past year, outpacing the broader consumer credit market, where balances increased just 0.3% — far below the long-term average of 5%, said TruStage Chief Economist Steve Rick, who assembled the report.
Yet the rebound is uneven across product lines. New auto loan balances at credit unions declined 2.3% in the first half of 2025, while first-mortgage originations surged 27% from a year earlier as prospective homebuyers took advantage of lower rates. Membership growth also cooled sharply, rising just 0.8% in the first six months of 2025 compared to 1.5% in the same period last year, underscoring shifting consumer behavior and increased competition for new relationships, Rick noted.
Here’s a close look at the data:
Total Credit Union Lending
Credit union loan balances rose 1.8% in the second quarter, above the 1.1% pace reported in the second quarter of 2024, due to lower interest rates increasing the demand for loans and rising credit union liquidity increasing the supply of loans. Credit union loan balances rose 3.9% in the year ending in June 2025, up slightly from the 3.4% reported for the year ending June 2024. Credit unions with asset size greater than $500 million reported faster loan growth this year than last year, while smaller credit unions reporting slower loan growth.
“Bank lending also rose 3.9% during the 12 months ending in June 2025, faster than the 2.6% reported in the year ending in June 2024, but below their long run average of 6%. Slower than normal lending growth rates are one of the ‘long and variable lags of monetary policy’ that Federal Reserve Chairman Jerome Powell likes to discuss at his press conferences,” Rick said.
Credit union loan balances are forecasted to rise only 4.5% in 2025, below the long run average of 7% per annum.
“We are forecasting slightly better credit union loan growth for 2026 (around 5%) as lower interest rates encourages members to borrow and spend and credit unions experiencing slower amortization of past debt,” Rick said.
Consumer Installment Credit
Credit union consumer credit loan balances (auto, credit card and other unsecured loans) fell 1.0% in the year ending June 2025, a deceleration from the 0.1% increase set during the 12 months ending in June 2024. A 1.9% drop in credit union auto loan balances account for the decline as the massive auto loan originates of 2022 get paid off today. According to the Federal Reserve, consumer credit outstanding for all lenders rose only $0.4 billion in August, below the $15 billion long run monthly average growth; non-revolving credit (large loans such as automobile and student loans) rose $6.4 billion while revolving credit (credit cards and home equity lines of credit) fell $6 billion.
The decline in revolving credit was due to lower gas prices, borrowers trying to pay down high-interest rate debt and lenders tightening lending standards, the report states.
“Consumer credit outstanding is rising only 0.3% year-over-year, below the 5% long-run average..Less loan creation leads to less spending and therefore less price pressure. This will create disinflation as the inflation rate falls from around 3% today to the Fed’s target of 2% over the next two years. Going forward, expect consumer credit growth to accelerate into 2026 as consumer demand picks up, lower interest rates make debt more attractive and credit union liquidity pressures subside,” Rick said.
Vehicle Loans
Vehicle sales fell in August to a 16.4 million unit seasonally-adjusted, annualized sales pace, which is down 0.4% from July, but up 6% from August 2024, when 15.5 million units were sold. New vehicle sales are still below the 17 million pre-pandemic pace considered to be the market equilibrium.
Consumers seem to be holding out for better deals despite higher auto inventories and improving incentives, Rick said.
“Higher than normal auto loan rates will ensure that new-vehicle sales remain below the 17 million pace through 2026. New vehicle sales are then expected to surpass 17 million in the first quarter of 2017, when the Federal Funds interest rate is expected to fall back to its 3.0% neutral rate. An increase in auto tariffs and therefore auto prices has reduced affordability for auto buyers,” the report states.
The Cox Automotive/Moody’s Analytic Vehicle Affordability Index, which measures affordability in the number of weeks it takes a median family income to purchase and finance a new vehicle, indicates autos are 14% less affordable today as compared to prior to the 2020 pandemic.
“Affordability will improve as auto interest rates decline as the Federal Reserve’s lowers its target rate, albeit with a lag,” Rick said.
Credit union new-auto loan balances fell 2.3% in the first half of 2025, less than the 4% decline reported in the first of 2024. Used auto loan balances rose 0.1% in the first 6 months of 2025 above the 0.8% decline reported in the first half of 2024. With auto loan interest rates falling to the 5.0-7% range, auto demand is expected to improve. Auto loan supply, however, is being constrained as credit unions’ auto loan delinquency and charge offs rates are up during the last year. This has led some credit unions to tighten credit standards and increase the percentage of loan applicants denied.
Real Estate Information
Credit union fixed-rate first mortgage loan balances rose 1.3% during the year ending in June 2025, above the 0.5% decrease reported in the year to June 2024. Credit union fixed-rate first mortgage loan balances fell 4.7% at a seasonally-adjusted annual rate in June, the third consecutive month of decline. Adjustable-rate first mortgage balances rose 13.3% during the last year, below the 19.3% gain reported in the year ending in June 2024.
Credit unions originated $62.4 billion first mortgage loans in the first half of 2025, a 27% increase above the $49 billion in originations in the first half of 2024, but a remarkable 60% decrease below the record $156.8 billion in originations in the first half of 2021.
Credit unions then proceeded to sell off only 24.9% of those originations into the secondary market in 2025, below the 33.7% sold off in the first half of 2024. The stage is set for a better second half of 2025, due to the recent fall in mortgage interest rates to around 6.3% and a rising supply of home for sale.
“We expect both purchase and refinance mortgage activity to accelerate during the next 6 months. The contract interest rate on a 30-year fixed-rate conventional home mortgage fell to 6.35% in September, down from 6.59% in August and slightly above the 6.18% reported in September 2024,” Rick explained. “We expect long-term interest rates to fall this winter as the Federal Reserve lowers their policy rate and winds down their Quantitative Tightening program; reducing their purchases of Treasury bonds and agency mortgage-backed securities.
Home prices fell 0.1% in July from June, the fifth consecutive month of declines, according to the S&P Case Shiller Home Price Index. Falling home prices were due to very low home affordability and heightened economic uncertainty reducing the demand for homes. Home prices were up 1.7% on a year ago basis.
“Expect the pace of home price appreciation to slow as inventory grows and heightened economic labor market uncertainty reducing demand. Lower interest rates could increase housing demand, but housing supply may increase more. So, expect home price appreciation to be zero to negative over the next year,” the report states.
Savings And Assets
Credit union savings balances rose 3.3% in the first 6 months of 2025, above the 2.7% increase in balances reported in the first half of 2024, as lower money market interest rates reduce the competitiveness of money market mutual funds. During the last 12 months, credit union savings balances rose 4.9%, above the 2.6% set in the year ending June 2024 but below the pre-COVID 19 pandemic average of 6.7%.
During the first half of 2025 credit unions were paying an average 1.92% interest on their savings deposits, up slightly from the 1.89% in the first haff 2024. The interest paid by credit unions on deposit balances should have then raised deposit balances by around 1.9%.
“Moreover, with credit union memberships growing 1.9% during the last 12 months, deposit balances should have increased as new members opened checking and savings accounts and deposited new money into the credit union. Therefore, savings per member is currently rising at a slow 3.0% pace (4.9% - 1.9%) which is below the 4.2% long run average,” Rick said.
The weak credit union savings growth rates are partly explained by the low national Personal Savings Rate (savings as a percent of disposable income) which averaged 5.1% over the last year according the Bureau of Economic Analysis, below the long run average of 6%. According to NCUA call report data, credit unions of all sizes reported better savings growth rates during the last year as compared to the similar period in 2024.
“We expect credit union savings balances to rise 5% in 2025 and then accelerate to 6% in 2026 as the Federal Reserve continues to lower short term interest rates,” Rick said.
Equity And Other Key Measures
Credit union provisions for loan losses, as a percent of assets, rose to 0.58% in the first half of 2025, from the 0.57% reported in the first half of 2024, but down from the 0.62% set for all of 2024. Historically, credit unions set aside 38 cents for every $100 in assets to account for loan losses. This surge in provisions during the last few years was one factor reducing credit union earnings and return-on-assets ratios in 2023 and 2024.
Provisions are elevated this year in part due to high net loan charge-offs which are significantly above the 0.50% long-run trend rate. Net loan charge-offs to average loans came in at 0.75% in the second quarter of 2025, which was like the 0.78% reported in the first quarter of 2024.
“Many credit union members are experiencing financial difficulties due to five factors. First, high inflation over the last 4 years reduced many members real (inflation adjusted) incomes and therefore reduced the purchasing power of their incomes. Second, higher interest rates are squeezing consumers who may have variable rate debt by raising their debt service costs. Third, high rents, food prices and auto insurance has reduced funds available for debt servicing. Fourth, the resumption of student loan payments has squeezed young borrowers' budgets,” the report states.
And finally, many credit union members have exhausted any “excess savings” they may have accumulated during the COVID-19 pandemic. These factors will continue high loan charge offs rates at credit unions and therefore high provisions for loan losses during the next year.
Credit Unions And Members
Credit union memberships grew 0.5% in the second quarter of 2025, below the 0.6% reported in the second quarter of 2024, due to a significant reduction in auto loan originations and slower job growth. On an annual growth rate basis, memberships are up only 1.9% in the year ending in June 2025, below the 2.4% pace set in the year ending in June 2024.
“We expect this slow membership growth pace to continue as many of indirect auto loans made during the boom year of 2022 get paid off and credit unions remove these inactive accounts from their membership rolls,” the report states.
The membership growth slowdown was also partially driven by weak job growth. During the last 12 months the economy created only 1.5 million jobs, down from the 2 million gained during the year ending in June 2024, according to the Bureau of Labor Statistics.
“Many Americans join credit unions that may be affiliated with their employer when they obtain employment. Most credit unions with less than $250 million in assets reported no to negative membership growth during the last 12 months. Meanwhile, credit unions with assets greater than $1 billion reported relatively strong membership growth of 3.4% due to organic growth and mergers activity. Credit unions should expect membership growth of around 2.0% in 2025, and a slightly better 2.2% membership growth is forecasted for 2026 as loan growth picks up,” Rick said.