Personal Finance Weekly News Roundup May 14, 2022

new roundup may 14

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Credit Sesame’s personal finance weekly news roundup May 14, 2022. Stories, news, politics and events impacting the personal finance sector during the last week.

  1. U.S. dollar soars to 20-year high
  2. Consumer borrowing is rising quickly
  3. Two-thirds of Americans check credit scores monthly
  4. Household wealth more dependent on stocks than in the past
  5. Household debt rose in the first quarter of 2022
  6. Bitcoin may be a victim of rising interest rates
  7. Inflation stabilizes, but at a very high level
  8. 30-year mortgage rates rise again
  9. Housing market shows strength despite higher rates
  10. Stock market losses continue

U.S. Dollar Soars to 20-year High

Measured against a sample of major foreign currencies, the U.S. dollar has risen to its highest level in 20-years. This has been achieved thanks to a sustained rally lasting over a month. Global economic and geopolitical disruptions have sent investors seeking the relative safe harbor of U.S. dollar-denominated securities. Also, rising Treasury yields have made U.S. fixed income securities more attractive to international investors. Full article at Reuters.com.

Consumer Borrowing is Rising Quickly

A monthly Federal Reserve report on consumer credit showed that debt balances rose sharply during the first quarter of 2022 in general, and during March in particular. Consumer credit balances overall rose at a seasonally-adjusted annual rate of 9.7% for the quarter overall, and at a rate of 14% during March. Credit card balances are rising faster than loan debt. Revolving credit, which is predominantly credit card debt, rose by 21.4% during the first quarter. Loan debt rose by 6.1%. Credit card debt is more exposed to the impact of rising interest rates than most loan debt. Full release at FederalReserve.gov.

Two-thirds of Americans Check Credit Scores Monthly

A recent survey found that 63% of respondents, or nearly two-thirds, reported having checked their credit scores within the past month. The survey found that people with lower credit scores are slightly more likely to have checked their credit recently than those with stronger scores. Among respondents with below-average credit scores, 67% reported having checked their score within the past month. This corresponds with 63% for people with average credit scores, and 60% for respondents with above-average scores. Over 90% of all respondents reported having checked their credit scores within the past year. Full article at PYMNTS.com.

Household Wealth More Dependent on Stocks than in the Past

People often confuse the direction of the stock market with the direction of the economy. Often, they can move in different directions. However, the two may be more closely tied these days than in the past. The percentage of household worth that is derived from the stock market has risen sharply in recent years. It now stands at 41.9%, which is more than twice what it was 30 years ago. This does not bode well for the economy, given the stock market’s poor start to 2022. Full article at CNBC.com.

Household Debt Rose in the First Quarter of 2022

Aggregate household debt rose by $266 billion in the first quarter, primarily due to a $250 billion rise in mortgage balances. However, both mortgage and auto loan originations slowed in the first quarter, after increasing sharply last year. Residential mortgage foreclosures rose from 9,000 in the fourth quarter of 2021 to 24,000 in the first quarter of 2022. This trend may indicate the impact of the expiration of mortgage forbearance programs that were put in place due to the pandemic. Full report at NewYorkFed.org.

Bitcoin May Be a Victim of Rising Interest Rates

The recent rise in interest rates has been rough on traditional asset classes like stocks and bonds, but Bitcoin’s performance indicates that cryptocurrencies may not be immune either. Because of interest rate conditions during Bitcoin’s lifetime, it and other cryptocurrencies don’t have much of a track record for performance in rising rate environments. Traditionally, rising rates tend to be bad for speculative investments, and this may be proving true of Bitcoin. The pioneering cryptocurrency continued to lose value early this week, after a 12% decline the week before. Full article at Reuters.com.

Inflation Stabilizes, but at Very High Level

The Bureau of Labor Statistics announced that inflation rose by 8.3% for the twelve months ending April 30, 2022. This is slightly lower than the 8.5% increase for the year ending March 31. Inflation for the month of April alone was 0.3%, well below the 1.2% increase in March. April’s monthly increase was the smallest since last August. These numbers indicate that inflation may be levelling off, but at a rate not seen since the early 1980s. Fuel oil continued to set the pace, with an 80.5% increase for the past 12 months. Full release at BLS.gov.

30-year Mortgage Rates Rise Again

Continuing their sustained upward trend, 30-year mortgage rates rose again last week. 30-year fixed rate mortgages are now at an average of 5.30%, up from 5.27%  a week ago. A year ago, the average rate for this kind of mortgage was just 2.94%. Sam Khater, Chief Economist of mortgage finance company Freddie Mac, estimates that the rise in 30-year mortgage rates over the past year would result in monthly payments being 30% higher. Full release from FreddieMac.com.

Housing Market Shows Strength Despite Higher Rates

The Mortgage Bankers Association reported that applications for purchase mortgages rose last week. Purchase mortgage applications rose by 5% during the week, despite rising mortgage rates. This contrasts with a 2% decrease in refinance applications. Over the past year, refinance activity is down by 72% as higher rates have drastically reduced refinancing opportunities. Adjustable rate mortgages continue to gain popularity and now represent 11% of new home loan applications. Full report at MBA.org.

Stock Market Losses Continue

U.S. stocks headed into the last trading day of the week on pace to extend a losing streak that stretches back well over a month. The S&P 500 and the tech-heavy Nasdaq indexes were on the verge of their sixth straight weeks of losses. The Dow Jones Industrials Average was nearing its seventh consecutive weekly loss. The S&P 500 is now down 18.1% from its peak. Full update from MarketWatch.com.

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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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