Credit Sesame’s personal finance weekly news roundup April 23, 2022. Stories, news, politics and events impacting the personal finance sector during the last week.
- BoA reports sharp jump in credit card spending
- Mortgage economist expects rising rates to slow, not halt housing rally
- Consumer credit defaults rise for 4th month in a row
- Student loan problems poised to increase this year
- Lawmakers call on Visa and MasterCard to hold of on raising merchant fees
- Rising interest rates slow mortgage activity
- Survey shows renters cornered by rising housing costs
- Gruesome case shows how pervasive credit card fraud is
- Mortgage rates rise for seventh consecutive weeks
- PayPal and Venmo fees rising
BoA Reports Sharp Jump in Credit Card Spending
The Bank of America reported that spending on its credit and debit cards was up 11% in March compared with a year ago. The trend accelerated in early April with an even sharper year-over-year climb in credit and debit spending. Credit and debit card spending rose at an especially fast rate among low-income households. An increase use of credit may be a sign that those consumers are having a harder time making ends meet in today’s high-inflation environment, though a senior Bank of America economist theorizes that it may mean consumers are more optimistic than expected. Full article at SeekingAlpha.com.
Mortgage Economist Expects Rising Rates to Slow, Not Halt Housing Rally
Coming off a hot 2021, home prices face a headwind in the form of rising mortgage rates. However, Sam Khater, Chief Economist for Mortgage Finance Company Freddie Mac expects home prices to be up again in 2022, though at a slower pace than last year. Freddie Mac expects 30-year rates to average 4.6% in 2022, even though they recently reached 5.0%. The company forecasts that the major impact of this will be sharply reduced refinancing volume. Meanwhile, it expects home price growth to average 10.4% this year, a strong increase but lower than last year’s 17.8% rise in home prices. Full announcement at FreddieMac.com.
Consumer Credit Defaults Rise for 4th Month in a Row
Figures from S&P/Experian indexes on consumer credit defaults show the percentage of consumers who’ve failed to make their debt payments rose for the fourth straight month. The overall index is made up of payment information on mortgages, bank cards and auto loans. While defaults have been rising recently, default rates overall and for mortgages and bank cards are below where they were a year ago. Default on auto loans have become more common over the past year. Full release at PRNewswire.com.
Student Loan Problems Poised to Increase This Year
With student loan payments set to resume in September of 2022 after being suspended because of the pandemic, the Consumer Finance Protection Bureau (CFPB) did a study to estimate how many student loan borrowers might have trouble making those payments. The study looked at five risk factors for being unable to resume full payments, such as problems keeping up with their student loans before the pandemic, or trouble with other forms of credit since the pandemic began. Based on this, the CFPB analysis found that 15 million borrowers have at least one of these risk factors, and 5 million have two or more. Full report at ConsumerFinance.gov.
Lawmakers Call on Visa and MasterCard to Hold Off on Raising Merchant Fees
A bipartisan group of U.S. Senators and Representatives has called on Visa and Mastercard to cancel or delay a planned increase in the interchange fees they charge merchants for processing credit and debit card transactions. The lawmakers say the increase would add to current inflation pressures. Most directly, it would cut into the profit margins of retailers, who have lobbied heavily to have politicians pressure the card companies not to raise the fees they charge those retailers. Full article at WIBW.com.
Rising Interest Rates Slow Mortgage Activity
With 30-year mortgage rates hitting their highest level in over a decade, the increased cost of mortgages is discouraging people from applying. The Mortgage Bankers Association reported that overall loan application volume decreased 5% last week on a seasonally adjusted basis. The hit was felt primarily in refinancing applications, which were down 8% last week and are down 68% over the past year. However, new purchase applications are also feeling the pinch of higher mortgage rates, falling 3% last week. With interest rates rising, a greater share of applicants are turning to adjustable-rate mortgages (ARMs). These mortgages represented 8.5% of all applications last week, their highest share since 2019. The lower initial rate on ARMs may explain their appeal in the current environment, but in the long run this may prove to be a more costly choice if mortgage rates continue to rise. Full release at MBA.org.
Survey Shows Renters Cornered by Rising Housing Costs
The Federal Reserve Bank of New York’s 2022 SCE housing survey showed rising prices impacting housing costs, with renters having limited options for escaping higher costs. The survey found that consumers expect home prices to rise by 7.0% over the next year, the highest expected increase since the survey began in 2014. Consumers expect rents to rise even more over the next year, by 11.5%. With mortgage rates expected to rise as well, renters are faced with a tough choice of either paying sharply higher rents or facing rising home prices and mortgage rates by trying to buy a home. Full release at NewYorkFed.org.
Gruesome Case Shows How Pervasive Credit Card Fraud Is
If anyone needs a reminder of the lengths thieves will go to when it comes to obtaining credit card information, a recent case from New Jersey should stick in the memory for a while. A man whose job it was to transport bodies to the morgue took time out from his route to steal credit cards from the deceased and make personal charges on those cards. The thief was caught when sharp-eyed relatives noted the posthumous activity in the accounts – a reminder to always review every statement for suspicious activity. Full article at NBC News.com.
Mortgage Rates Rise for Seventh Consecutive Week
30-year mortgage rates rose for the seventh consecutive week, according to mortgage finance firm Freddie Mac. That put those rates at 5.11%, a whopping 1.35% higher than they were before the seven consecutive increases began. 15-year and adjustable-rate mortgages also saw persistent rate increase over the same seven-week span. Heading into the busy spring real estate season, higher rates may cool what has been a strong seller’s market. Rate history at FreddieMac.com.
PayPal and Venmo Fees Rising
Balance transfer apps like PayPal and Venmo have been touted as a way to avoid high credit card fees, but the cost of those transfers is rising as well. Both balance transfer services announced they will hike their per-transaction costs for consumers from 1.5% with a $15 maximum to 1.75% with a $25 maximum. Full article at TechCrunch.com.