“If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”- John Keynes
That’s right, America. We have now surpassed $1 trillion in collective credit card debt. In the words of the 1970’s band Kool & the Gang, “Celebrate good times, come on!”
So, unemployment is staying steady or dropping, debt is rising, interest rates are double where they were last year, and the credit just keeps on jumping up. Something will have to give, but as it looks now, the Fed will likely bump the rate again before the end of 2023.
What does this mean for lenders? For mortgage lenders, keep hunkering down, chase what little purchase business is out there, and defend all of the loans in your portfolio if you have one. Refinance activity has ticked up over the past couple of months as people are taking cash out of their homes, even at the expense of a bump up in mortgage rate, in order to pay off their high-interest credit cards. It’s not a significant bump in refinances but certainly more refinance activity than in the first half of 2023. Monitor you customers and leads and when you see them in the market, make sure you are finding out what their needs are and offering your solutions.
For consumer lenders, the personal loan activity is hot. On the subprime side, consumers need for cash is growing. And on the near prime and prime side, as we stated, credit card debt is running rampant. According to WSJ, interest on a typical credit card has gone from 14.6% in February 2022 to 20.7% in May of 2023. That’s a whopping 6% increase on record high credit card rates. For prime offerings by banks, credit unions and other lenders, a refinance debt consolidation offer can really appeal to a lot of consumers right now.
There are opportunities in the consumer lending market if you have the right products and can find the right consumers at the right time. That’s all for today. Gotta run. I have some valuable American Airlines credit card rewards to go earn!