Amid the shifting economic conditions, credit unions nationwide are positioning themselves for resilience and growth. The recent economic and credit union update webinar, featuring Steven Rick, director and chief economist at TruStage, provided a wealth of insights into the trends, challenges, and opportunities that will shape the year ahead. While the data presents a mix of signals, the overall message is clear: credit unions are uniquely positioned to thrive, thanks to their member-first philosophy, adaptability, and the innovative technology.
Interest rates—stability on the horizon
One of the most significant factors influencing the financial sector is the Federal Reserve’s approach to interest rates. The Federal Reserve is aiming for a Federal Funds Interest Rate of 3.0%. Recently, the Fed lowered the rate to 3.6%, which is a significant drop of 1.75% over the last 18 months. This moves us closer to their ideal target, and there’s a good chance we’ll see rates lowered even more in the coming year.
However, the decision has the Fed balancing two big concerns—employment and inflation. If unemployment rises, they may lower rates to help create jobs, but if inflation increases, they might hold rates steady to keep prices from mounting. It’s a balancing act, and credit unions need to stay tuned in so they can best serve their members.
Loan growth and member confidence
Despite a modest rebound in consumer credit growth—just 0.4% in late 2025, which would typically be considered recessionary—credit unions have shown remarkable resilience. Credit union loan growth ended the year at about 3% growth, outperforming broader consumer credit trends, though still well below the long-term average of 7%.
Higher interest rates and lower consumer confidence have contributed to some uncertainty, but credit unions continue to innovate. The strong loan growth from three years ago means credit unions are now working from a higher baseline, creating an opportunity to focus on new production and member engagement to maintain momentum. Meanwhile, the U.S. economy is expected to grow at its long-term average of 2% in 2025—a sign of stability and consistency—even if slightly below the exceptional performance of recent years.
Housing and market trends
Home price appreciation has moderated, with the OFHEO House Price Index at 2.9% in Q2 2025 compared to the long-term average of 4.1%. This cooling trend follows the extraordinary surge of nearly 20% appreciation seen just a few years ago. For credit unions, this stability can open doors for more affordable homeownership opportunities and create a healthier, more sustainable housing market for members.
Stock prices are climbing rapidly, fueled by optimism around advancements in artificial intelligence. This growth is creating a wealth effect among higher-income households and driving increased market activity. Margin debt is also rising as investors seek to capitalize on these gains. Questions remain about AI’s long-term impact—whether it will boost productivity and reduce costs, or introduce new challenges yet to be seen.
Staying ahead of potential challenges
Rick outlined several economic risk factors that could create headwinds for credit union growth in 2026. While these issues could present challenges, being aware allows for preparation and adaptation along the way. Among the considerations: the Federal Reserve’s timing in responding to market shifts, possible trade tensions, and rising energy costs that could impact household budgets. Market corrections in equity or home values, and stress in commercial real estate, are also areas to monitor. Global events and international disputes add another layer of complexity.
Labor market and household
Unemployment has edged up slightly to 4.6%, which is still close to what many economists consider full employment. This modest cooling in the labor market, combined with slower wage growth and softer consumer confidence, has contributed to a small increase in credit union net charge-off rates—now at 0.73%, compared to the long-run average of 0.5%. Loan delinquency rates have also risen slightly, about 20 basis points above the typical 0.75% level.
Several factors are adding pressure to household budgets, including rent inflation, the return of student loan payments, and higher car insurance costs. These conditions, along with the natural runoff of older loans, help explain why delinquency and charge-offs are somewhat elevated even in a generally strong employment environment. Inflation has averaged 2.8% over the past 20 months, remaining above the Federal Reserve’s 2.0% target, and economists continue to monitor it closely.
Despite these pressures, credit union savings growth remains a bright spot. After surging to double digits post-pandemic, savings growth has settled into a steady pace. The long-run average is 6.6%, and Rick expects credit unions to finish the current year at about 5.0%. Looking ahead to 2026, savings growth is projected to move closer to that historical average—an encouraging sign of stability and continued member engagement.
Loan growth and economic outlook—signs of gradual improvement
Credit unions faced challenges in auto lending during 2025, as overall vehicle sales and consumer demand remained slightly below the $17 million market equilibrium. While prices are still rising, the pace of increases has slowed compared to recent years, which could help ease affordability concerns. Although weak job creation and historically low consumer sentiment have influenced borrowing behavior, these conditions are expected to stabilize over time.
Despite a slight decline in auto loan balances in 2025, the outlook for 2026 is more encouraging. Rick anticipates that continued interest rate reductions—potentially another 50 basis points—will create a more favorable environment for borrowing. Combined with gradual improvements in consumer confidence, these factors could support a rebound in auto loan activity. While growth may not reach the historical 5–8% range immediately, Rick projects overall loan balances to rise about 5% next year, signaling progress and a step toward normalization. Additionally, credit union ROA is expected to increase to approximately 0.85%, reinforcing a positive trend for financial performance.
