The FDIC First Quarter Lending Activity Report released the end of June illustrated a 1.7% increase in construction lending activity, to $344.2B annually. The construction lending delinquency rate dropped to 0.47% (Down from the peak of 16.9% in 2009). Commercial real estate (CRE) lending decreased 2.1% to $4,451B. The 30-year fixed rate mortgage dipped five basis points in June, to an average rate of 4.38%. Lending liquidity remains in the healthy range. The TED Spread (a measure of banking liquidity) dropped to 0.36% in June, well within the positive range (<1% is considered to be optimal). Lending activity has been increasing, and a recent Fed survey is exposing the cause. The Board’s latest senior loan officer opinion survey found a loosening of US bank commercial lending terms that hasn’t been seen in three years. The April 2018 survey revealed that US banks loosened lending policies, narrowed spreads and raised the maximum loan size for all three major categories of CRE loans over the past year. Foreign banks surveyed also reported relaxing their terms. Many sources stated their institutions had eased lending standards in part because of aggressive competition from other banks and nonbank lenders. A willingness to accept more risk, stable CRE prices, vacancy rates, fundamentals and capitalization rates also played into the decision to loosen up commercial loan terms.