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News roundup August 26, 2023

Weekly Personal Finance News Recap - AUGUST 26, 2023

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Credit Sesame’s personal finance weekly news roundup August 26, 2023. Stories, news, politics and events impacting the personal finance sector during the last week.

  1. Overdraft fee charges rise for the first time since 2021
  2. Rising Treasury bond yields dampen asset prices
  3. Panama Canal traffic snarl threatens supply chain
  4. Small businesses continue to believe the U.S. is in a recession
  5. Regulator sues short-term lender for churning loans
  6. Home purchase mortgage applications lowest since 1995
  7. Existing home sales fell in July 2023
  8. Mortgage rates continue to rise

1. Overdraft fee charges rise for the first time since 2021

The total dollar amount of overdraft fees charged rose in the second quarter of 2023. It was the first such rise since the final quarter of 2021. Overdraft fee charges have generally fallen in recent years, mainly due to regulatory pressure to reduce or eliminate such charges. Despite the general decline in overdraft charges, they still add up to a large amount. In the second quarter of 2023, overdraft fee charges industry-wide totaled $1.43 billion. Besides the direct cost of overdraft fees, consumers should be aware of other negative consequences of overdrafting their bank accounts. These include possible late payments and forced closure of an account. See article at SPGlobal.com.

2. Rising Treasury bond yields dampen asset prices

The yield on 10-year U.S. Treasury bonds rose to a 15-year high of 4.366 this week. Rising bond yields reflect falling bond prices, but they also tend to have a negative impact on other assets. The higher bond yields go, the more they draw money away from riskier assets like stocks. Bond yields are reacting to concerns about the lingering threat of inflation. While the inflation rate has dropped sharply over the past year, a persistently strong economy and rising energy prices have raised concerns that it may flare up again. Also, downgrades of the U.S. government’s credit rating may have damaged the appeal of Treasury securities, causing yields to rise. See article at Reuters.com.

3. Panama Canal traffic snarl threatens supply chain

Just as global supply chains returned to normal after COVID, weather conditions are creating severe delays for the crucial Panama Canal shipping corridor. Due to drought conditions, traffic through the canal has been delayed by as much as three weeks. Those conditions lower the level of the water in the canal. This means ships have to carry less cargo to pass through. Concerns are that these extreme conditions may become more common due to global climate change. The resulting shipping bottleneck could cause shortages and inflation pressures. See article at Reuters.com.

4. Small business owners continue to believe the U.S. is in a recession

A slight majority of small business owners say they believe the country is in a recession. This is according to a survey by the National Federation of Independent Business. A similar survey in April also found that most small business owners thought a recession had already started. These business owners seem to base their assessment on a general impression of the economy rather than what they see firsthand. More than two-thirds of survey respondents reported that the state of their own business was either “excellent” or “good.” 80% said their local economy was at least “okay.” See article at Yahoo.com.

5. Regulator sues short-term lender for churning loans

The Consumer Financial Protection Bureau (CFPB) has sued Heights Finance Holding Company, formerly Southern Management Corporation, for predatory lending practices. The CFPB alleges that Southern and its affiliates used deceptive techniques to lock customers into short-term, high-cost loans. They approved loans they knew the customers could not pay off and repeatedly induced them to refinance. Even though the company’s loan terms are usually just a few months, they managed to lure 10,000 customers into a continuous cycle of renewed loans. The company operates in 250 locations across six states. See announcement at ConsumerFinance.gov.

6. Home purchase mortgage applications lowest since 1995

According to the Mortgage Bankers Association, last week, the number of applications for home purchase mortgages dropped to its lowest level since April 1995. The slowdown in home-buying activity came amid a spike in Treasury bond rates that pushed mortgage rates above 7%. Adjusted for seasonal differences, applications for home purchase mortgages were down by 5% from the previous week and 30% lower than a year earlier. See news release at MBA.org.

7. Existing home sales fell in July 2023

Completed sales of existing homes slipped by 2.2% in July and are off by 16.6% from a year ago. Sales grew in the West but declined in the other three major regions of the U.S. market. Over the past year, the supply of unsold inventory relative to the sales pace has increased even though fewer houses are available for sale. There are now 14.6% fewer houses on the market than a year ago. And yet, this represents 3.3 months of supply at the current sales pace, up from 3.2 months in July of 2022. See news release at NAR.realtor.

8. Mortgage rates continue to rise

30-year mortgage rates rose for a fifth straight week to reach 7.23%. That’s their highest since the beginning of June 2001. 15-year mortgage rates have also increased for five weeks in a row. Continuing strength in the economy and lingering concerns about inflation were cited as reasons for the recent climb in mortgage rates. See rate details at FreddieMac.com.

Weekly News Headlines from Credit Sesame

Richard Barrington
Financial analyst for Credit Sesame, Richard Barrington earned his Chartered Financial Analyst designation and worked for over thirty years in the financial industry. He graduated from St. John Fisher College and joined Manning & Napier Advisors. He worked his way up to become head of marketing and client service, an owner of the firm and a member of its governing executive committee. He left the investment business in 2006 to become a financial analyst and commentator with a focus on the impact of the economy on personal finances. In that role he has appeared on Fox Business News and NPR, and has been quoted by the Wall Street Journal, the New York Times, USA Today, CNBC and many other publications.

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