As money has become more expensive to borrow, fewer consumers are choosing to borrow it. Applications for credit cards, auto loans and mortgages all fell in 2023. Those who did choose to apply for credit cards or auto loans were more likely to be rejected.

This is all according to the credit access survey out Monday from the Federal Reserve Bank of New York. This might be the sign of a slightly gloomier consumer, but don’t monetary policymakers want us to be a little bit gloomy?

When you apply for a loan, you’re making a bet that future you will be good for it. But many consumers are not in the mood to gamble. 

“People are just not really feeling as optimistic or confident about their ability to pay back these loans,” said Christine McDaniel, a George Mason University economist.

McDaniel pointed out the application rate for any kind of credit dropped to just over 41% this year from about 45% in 2022. That drop is consumers pausing before they borrow money at today’s relatively high interest rates.

“You just have that increased uncertainty about how much it’s really going to cost to get this project done, or are you still even going to have a job when all these bills are coming due?” McDaniel said.

Also, in the wake of the regional bank turmoil earlier this year, lenders are making it harder to get a loan. 

“They are being more judicious with where they’re lending money, really focusing on core customers,” said Herman Chan, who researches regional banks as a senior equity analyst at Bloomberg Intelligence.

The rejection rate for auto loans, for example, is at 11% — the highest it’s been since the survey started asking about it a decade ago. That’s not great news if you’re a new customer who wants to buy a truck. 

But this reduction in economic activity is what the Fed wants to happen in order to get inflation under control. 

“This is exactly what the whole point of raising interest rates is, right, is to slow down the amount of spending in the economy and hope that you can do that in a way that does not, you know, disrupt other markets too much,” said Ethan Struby, an economist at Carleton College who used to work at the Federal Reserve.

Essentially, a soft landing. 

George Mason economist McDaniel said it’s still possible. But, she notes, it will likely be bumpy. And this survey shows that consumers are fastening their seat belts.