Credit Sesame’s personal finance weekly news roundup April 15, 2023. Stories, news, politics and events impacting the personal finance sector during the last week.
- Bank withdrawals take a break
- Debt and interest rates continue to rise
- Older applicants often blocked from new mortgages
- IMF outlook continues to get gloomier
- Inflation eases but still threatens
- Producer prices suggest more inflation relief on the way
- Fed meeting notes mention the probability of recession
- Consumers still expect to spend more despite tighter credit
- Mortgage rates still declining but may be flattening out
1. Bank withdrawals take a break
U.S. commercial banks saw a slight increase in deposits at the end of March. That’s the first rise in deposits since two bank failures triggered a wave of withdrawals. A halt in the outflow of deposits would be a great help in stabilizing the banking system. Significantly, even small and mid-sized banks saw an increase in deposits. Comments by regulators had caused particular concern about smaller banks being more vulnerable because the government would prioritize assistance according to whether a bank was considered too big to fail. See article at Reuters.com.
2. Debt and interest rates continue to rise
Newly-updated figures from the Federal Reserve showed that non-mortgage consumer debt continued to rise in February. Overall non-mortgage debt rose at an annual rate of 3.8%, to a record high of $4.82 trillion. Revolving debt (typically credit card balances) rose at an annual rate of 5% while other debt rose at an annual rate of 3.4%. The faster growth of revolving debt is concerning because it typically carries higher interest rates than installment debt. The Fed’s latest update showed the average rate charged on credit card balances is now 20.92%. See consumer credit data at FederalReserve.gov.
3. Older applicants often blocked from new mortgages
A new study of more than 9 million mortgage applications found that older applicants are often turned down for mortgages. The study found that rejection rates rose as applicants got older, and especially once they turned age 70. Also, older applicants who were approved for mortgages generally paid higher interest rates. The study found that these obstacles face even those older borrowers with good credit records. Besides making it harder for older people to buy a home, the age barrier may make it difficult for some homeowners to use financial options like refinancing or home equity loans. See article at NYTimes.com.
4. IMF outlook continues to get gloomier
The International Monetary Fund (IMF) announced that it was lowering its global economic growth outlook for the year from 2.9% to 2.8%. This represents a continued downgrading of the IMF’s growth forecast, which a year ago stood at 3.4%. In a report that stated “the fog around the world economic outlook has thickened,” the IMF stated that the global economy faces a sustained period of mediocre growth over the next few years, with a heightened risk of descending into a recession in the near term. See article at NYTimes.com.
5. Inflation eases but still threatens
The Bureau of Labor Statistics announced that the Consumer Price Index (CPI) rose by just 0.1% in March. That was the lowest monthly reading so far in 2023, and brought the 1-year inflation rate down to 5.0%. However, there were still a couple red flags in the CPI report. The core inflation rate, which excludes the volatile food and energy sectors, was a relatively high 0.4% in March. Also, the overall CPI number benefited from a 4.6% decline in energy commodity prices during March. However, that does not reflect the impact of a recent decision by major oil producers to cut output in an attempt to boost prices. See full report at BLS.gov.
6. Producer prices suggest more inflation relief on the way
A day after the Bureau of Labor Statistics announced a mild increase in the Consumer Price Index for March, it announced that producer prices actually declined during the month. The Producer Price Index, which is a measure of wholesale costs, declined by 0.5% last month. That should ease some price pressure, especially if consumer demand slows enough for retailers to tighten their profit margins. See news release at BLS.gov.
7. Fed meeting notes mention the probability of recession
Notes from last month’s Fed meeting that were released to the public this week mention that the Fed is projecting that there will be a recession later this year. However, the comments described the recession as likely to be mild. Recent instability in the banking sector was cited as a reason for the more pessimistic outlook. It’s notable that despite recognizing the probability of a recession, the Fed still raised interest rates at its last meeting. This reflects how seriously the Fed takes the continued threat of high inflation. See article at CNN.com.
8. Consumers still expect to spend more despite tighter credit
The latest Survey of Consumer Expectations from the Federal Reserve Bank of New York showed continuing reliance on borrowing despite tighter credit standards. Consumers expect spending to grow at a faster pace than their incomes. They expect spending to grow by 5.7% over the next year, but expect household income to grow by just 3.3%. The percentage of households that said it’s harder to obtain credit now than it was a year ago has reached a new high. See survey report at NewYorkFed.org.
9. Mortgage rates still declining, but may be flattening out
30-year mortgage rates fell for a fifth consecutive week. However, the pace of declines has slowed. Last week 30-year rates fell by just 1 basis point, to 6.27%. That puts 30-year rates 0.15% lower than when 2023 began, but 1.27% higher than they were a year ago. See mortgage rate data at FreddieMac.com.