Credit Sesame’s personal finance news roundup January 13, 2024. Stories, news, politics and events impacting personal finance during the past week.
- Consumer advocate flags problems with student loan servicers
- Non-mortgage consumer debt exceeds $5 trillion
- Inflation perked up in December
- Regulators allow exchange-traded crypto funds
- Security cited as biggest factor in choosing a bank
- Mortgage rates rise for a second week in a row
- Consumers expect spending and inflation to outpace earnings growth
- Mortgage applications respond to sustained drop in mortgage rates
Consumer advocate flags problems with student loan servicers
The Consumer Financial Protection Bureau (CFPB) issued a report highlighting several problems with many private companies responsible for servicing government student loans. The heart of the problem is that during the hiatus in student loan payments, many of these loan servicing companies cut costs by drastically reducing staff. Now that payments have resumed, they are unprepared to handle the surge in customer service issues. The resulting problems cited by the CFPB are average call wait times exceeding an hour, hundreds of thousands of applications for income-driven payment programs that have not been processed after 30 days or more, and frequent billing errors. See report at ConsumerFinance.gov.
Non-mortgage consumer debt exceeds $5 trillion
The latest report on consumer credit from the Federal Reserve showed that non-mortgage consumer debt has passed the $5 trillion mark for the first time. This includes nearly $3.7 trillion of loan debt and over $1.3 trillion of revolving credit debt. Most of the latter is credit card balances. Revolving credit grew at an annual rate of 17.7% in November, while nonrevolving credit grew at an annual rate of just 1.5%. The faster growth rate for revolving credit is disturbing because it typically carries much higher interest rates. See report at FederalReserve.gov.
Inflation perked up in December 2023
The Consumer Price Index (CPI) rose by 0.3% in December. That was its biggest monthly increase since September. For 2023, the CPI was up 3.4%, with core inflation rising by 3.9%. Roughly half of the December increase was attributed to rises in housing costs. These were up by 0.5% in the month, representing just over a third of the overall index. 2023’s 3.4% was the tamest year for inflation since 2020 and a clear improvement over 2022’s 6.5% rise. See CPI report at BLS.gov.
Regulators allow exchange-traded crypto funds
The SEC has approved the first publicly traded mutual funds based on the performance of bitcoin, the world’s largest cryptocurrency. The decision was made via a 3-2 vote of the SEC’s commissions. Approval was granted to 11 different exchange-traded funds (ETFs). The ETF format will make crypto much more widely available to smaller investors. The decision is controversial because cryptocurrencies lack earnings or other normal characteristics of securities and are unusually subject to manipulation and speculation. See article at Reuters.com.
Security cited as biggest factor in choosing a bank
A new survey found that consumers most commonly named security as their leading reason for choosing their bank. 25.4% of respondents cited this as their leading decision factor, even though FDIC insurance broadly provides uniform safety levels for most depositors across all banks. Security earned more than twice as many responses as the second leading choice, which was low costs. Despite the prevalence of online banking, the proximity of local branches came in as the third-leading reason for choosing a bank. See article at PYMNTS.com.
Mortgage rates rise for a second week in a row
Coming off a streak of nine consecutive weekly declines, 30-year mortgage rates have risen in the past two weeks. 30-year rates rose by 0.04% last week to reach 6.66%. In all, rates are up by 0.05% over the past two weeks, a slight uptick after declining by 1.18% over the final two months of 2023. The real test will come in the week ahead as mortgage rates respond to a hotter-than-expected inflation report. See mortgage data at FreddieMac.gov.
Consumers expect spending and inflation to outpace earnings growth
The latest Survey of Consumer Expectations from the Federal Reserve Bank of New York found that consumers are somewhat reining in their spending and inflation outlook. Despite this, consumers expect both to grow faster than their wages over the next 12 months. Spending is expected to grow by 5.0%. This is down from 5.2% in the previous monthly survey but still well above the 3.1% pre-pandemic level. Inflation is expected to rise by 3.0%, down from 3.4% in the previous survey. These expectations for spending and inflation growth are higher than the 2.5% expectation for wage growth. That’s the lowest outlook for wage growth since April of 2021. See details at NewYorkFed.org.
Mortgage applications respond to sustained drop in mortgage rates
Mortgage applications were up by a seasonally adjusted 9.9% last week, following a decline in mortgage rates in the previous two months of 2023. Refinance applications were up by 30% compared to a year earlier. On the other hand, purchase applications were down by 16% year-over-year. See details at MBA.org.
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