FICO to factor BNPL into credit scores this fall

In recognition of the increased use of Buy Now Pay Later (BNPL) programs by American consumers, FICO is launching a version of its credit scores that takes into account BNPL activity. The new credit scores are expected to be available in the fall of 2025. For individuals who struggle to qualify for traditional credit, factoring in BNPL transactions could be a way of building a credit history. Inclusion of those transactions will depend on whether the BNPL lender reports activity to the credit bureaus. The credit history will record BNPL and may be positive or negative depending on whether consumers pay on time. However, not all credit scores will include BNPL transactions. See article at Yahoo.com.

Mixed credit results for consumers in May 2025

The latest TransUnion Credit Industry Snapshot revealed both positive and negative trends for consumers in May. Average balances owed increased for credit cards and mortgages, but decreased for unsecured personal loans. Rates of serious delinquencies on payments rose for auto and unsecured personal loans, but declined for credit cards and mortgages. However, the falling rates of seriously delinquent accounts for credit cards and mortgages might prove short-lived. Serious delinquency rates for these forms of credit refer to those that are 90 days or more overdue. While those rates dropped in May, shorter-term delinquency rates rose for both credit cards and mortgages. That means more consumers with those forms of debt have fallen behind recently. See details at TransUnion.com.

Consumer confidence drops sharply in June 2025

The Conference Board’s Consumer Confidence Index fell by 5.5% in June. This erased roughly half of the progress made in May, leaving the Index substantially down for the first half of 2025. The component of the Index that measures current business and labor market conditions fell by 4.7% during June. The Expectations Index, which measures the economic outlook consumers have for the near future, fell by nearly 6.3%. This left the Expectations Index well down into a range that has traditionally been associated with recessions. Tariffs and inflation continue to be issues that weigh most heavily on people’s minds. See news release at Conference-Board.org.

Existing home sales sluggish in May 2025

The National Association of Realtors reported that sales of existing homes rose at a seasonally-adjusted pace of just 0.8% in May. Year-over-year, sales of existing homes declined by 0.7%. The sluggish pace of sales led to a 6.2% increase in unsold inventory on the market. That inventory now represents 4.6 months’ worth of supply. Different regions of the country experienced differing trends in existing home sales. For May, sales volume increased in the Northeast, Midwest, and South, while it decreased in the West. Year-over-year, sales increased in the Northeast and Midwest, while they declined in the South and West. See details at NAR.Realtor.

Home price growth cools in April 2025

The latest release of the S&P CoreLogic Case-Shiller U.S. National Home Price shows that home prices continued to grow in April, though at a slower pace than the previous month. The Index rose by 0.61% in April, compared with 0.77% in March. Year-over-year, national home prices are up by 2.72%. See home price data at SPGlobal.com.

2025 Q1 GDP drop deeper than first reported

The final estimate for the first quarter of 2025 Gross Domestic Product (GDP) showed that the economy’s decline during the quarter was worse than previously thought. The change in GDP was revised downward from -0.2% to -0.5%. The figures are reported at an annual pace and after seasonal adjustment. The decline in GDP during the first quarter indicates an abrupt slowdown in the economy, following a 2.4% annual growth rate in real GDP in the fourth quarter of 2024. It’s too early to tell whether this decline is just a temporary blip or a sign of the beginning of a recession. See GDP report at BEA.gov.

Mortgage rates dip for fourth straight week

30-year mortgage rates fell by 0.04%, to reach 6.77%. This was the fourth consecutive week in which mortgage rates have fallen, though in each case the moves have been slight. 30-year mortgage rates fell by a total of 0.12% in June. 15-year mortgage rates have also fallen for four weeks in a row. The decline in 15-year rates has totaled 0.14%, leaving them at 5.89%.

Personal income and spending declined in May

US personal income fell by $109.6 billion in May, a 0.4% decline. This is an ominous sign for the U.S. economy. With personal income falling, consumers began to rein in their spending. Personal consumption expenditures fell by 0.1% during May. Cuts to government benefit payments and loss of income by farm proprietors were cited as leading reasons for the decline in personal income. See report at BEA.gov.

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2024 personal income grew faster than inflation

The Bureau of Economic Analysis found that personal income grew by 2.4% in 2024 after adjusting for inflation. However, household spending grew even faster, at 3.1%. The Personal Consumption Expenditures (PCE) price index rose 2.6% for the year. The PCE price index is the preferred inflation measure the Federal Reserve uses in making interest rate decisions. See report at BEA.gov.

Employment growth continues in January 2025

The US economy added 143,000 new jobs in January. This extends the streak of monthly job growth the economy has been on for over four years. Still, January 2025’s job growth was slightly below last year’s monthly average of 166,000. In fact, 2024’s job market was even stronger than previously reported. In the new employment report, November and December’s job growth numbers were revised upward by a combined total of 100,000. The biggest employment gain in January was in healthcare, with 44,000 new jobs added. See employment report at BLS.gov.

Head of Consumer Financial Protection Bureau fired

The incoming Trump Administration has fired Consumer Financial Protection Bureau (CFPB) director Rohit Chopra. Under Chopra, the CFPB actively advocated for limits on the cost of financial products and punished financial firms that broke the law. Critics felt that Chopra’s emphasis on consumer protection and strict enforcement placed too great a burden on the financial industry. See the article at NYTimes.com.

Senators propose bill to cap credit card fees at 10%

Senators Bernie Sanders and Josh Hawley have proposed a bill limiting credit card fees to 10%. The move takes up a campaign promise by Donald Trump and has supporters on both sides of the aisle. Critics say that such a low limit would severely restrict credit accessibility. The result could be that very few Americans could qualify for a credit card and a severe reduction in consumer spending. See article on Yahoo.com.

US job openings declined in 2024

The number of jobs open in the US declined in December and over the past year. The Bureau of Labor Statistics reported 7.6 million job openings as of the last day of December. That’s down by 556,000 openings from the previous month and by 1,289,000 jobs from a year earlier. The numbers are adjusted to neutralize the impact of expected seasonal hiring trends. In recent years, an unusually high number of job openings relative to the number of job seekers has contributed to inflation. Fewer job openings could ease this inflationary effect, though it makes for a less favorable market for job seekers. See report at BLS.gov.

Banks raise credit standards in Q4 2024

The Federal Reserve’s Senior Loan Officer Opinion Survey showed that banks raised their approval standards for credit cards in the final quarter of 2024. At the same time, consumer demand for credit cards weakened. Demand for mortgages and consumer loans, other than auto loans, also weakened. Lending standards for products other than credit cards were generally unchanged. See SLOOS report at FederalReserve.gov.

Mortgage delinquency rates rose in Q4 2024

Late payments on residential mortgages increased in the final quarter of 2024. The delinquency rate for one-to-four-unit properties rose by 6 basis points during the quarter to 3.98%. This is 10 basis points higher than it was a year earlier. A closer look shows the problem is much greater for some types of mortgages. The delinquency rate on conventional mortgages is near its all-time low, at 2.62%. In contrast, the delinquency rate on VA mortgages is 4.70%, and FHA mortgages is 11.03%. See news release at MBA.org.

Mortgage rates drop for third consecutive week

30-year mortgage rates dropped by six basis points last week. That brought them to 6.89%. This was their third consecutive weekly decline, though they’ve only dropped by a total of 15 basis points over that span. Previously, they rose for five straight weeks for a total of 44 basis points. Overall, mortgage rates are still 81 basis points higher than they were at the end of September, so the trend over the past few months has been decidedly upward. 15-year mortgage rates fell by seven basis points last week. Like 30-year rates, 15-year rates have also fallen for three weeks in a row. However, 15-year rates have made more progress during that span, falling by a total of 22 basis points. See mortgage data at FreddieMac.com.

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Chicago bank first failure of 2025

Pulaski Savings Bank of Chicago, IL, was closed by the Illinois Department of Financial and Professional Regulation, making it the first bank to fail in the new year. Only two banks failed in 2024, the most recent in October. Pulaski Savings Bank was small, with just $42.7 million in deposits. Under FDIC supervision, its operations have been transferred to Millennium Bank of Des Plaines, IL. Under the arrangement, former customers of Pulaski Savings Bank could have immediate access to their deposits. The FDIC insurance fund will cover losses. The FDIC suspects fraud was a factor in the bank’s failure. See news release at FDIC.gov.

Consumer credit delinquencies still rising

Serious delinquency rates rose across all major consumer credit products in December. Credit cards, auto loans, personal loans, and mortgages all saw the percentage of customers with payments 90 days or more late increase during the month. While consumers are increasingly having trouble paying their bills, the average balance owed on credit cards has risen. The average balance is now $6,580, up from $6,416 in November. For all products, serious delinquency rates are negligible for customers with prime or better credit scores. The vast majority of the problem is with customers who have subprime scores. See Credit Industry Snapshot at TransUnion.com.

Median weekly earnings growth outpaced inflation in 2024

The median weekly earnings of full-time workers rose to $1,192 in the fourth quarter of 2024. This was 4.1% over the same period a year earlier, which outpaced the 2.7% inflation rate over the same period. The survey found that overall, the median wage for women was 83.2% of the median wage for men. The survey also showed a big contrast in earnings according to educational attainment. Full-time workers aged 25 or over without a high school diploma earned a median weekly wage of $776. Those with a high school diploma but no college education earned a median weekly wage of $977. Those with at least a bachelor’s degree had median weekly earnings of $1,705. See details at BLS.gov.

More consumers making minimum credit card payments

The percentage of credit card customers who pay no more than the minimum due on their accounts has reached 10.75%. This is the highest percentage on record, based on data from the Federal Reserve Bank of Philadelphia dating back to 2012. A high number of customers paying no more than the minimum indicates that many consumers are struggling to pay their bills. Making just the minimum payment causes a credit card balance to drag on for longer, leading to the customer paying more interest. See news release at PhiladelphiaFed.org.

Mortgage rates fall a little

30-year mortgage rates fell for the first time in six weeks. They eased by 0.08% to 6.96%. Even with this step back, 30-year rates are 0.88% higher than when they reached their recent low point of 6.08% at the end of September. 15-year rates also fell for the first time in six weeks. These rates fell by 0.11% to 6.16%. See details at FreddieMac.com.

Mortgage applications stable

Mortgage application volume has been steady even though 30-year mortgage rates have risen for five of the last six weeks and by 36 basis points overall during that stretch. The Market Composite Index, which measures purchase and refinance applications, was up by a seasonally adjusted 1% last week. Compared with the same week a year ago, purchase applications were up 2%, and refinance applications were up 42%. These favorable year-over-year comparisons come despite higher mortgage rates than a year ago. This suggests consumers have adjusted their expectations to the generally higher level of rates over the past couple of years. See details at MBA.org.

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Job growth strong in December 2024

The US economy added 256,000 jobs in December. This completed the fourth year in a row in which employment grew every month. In total, the economy added 2.2 million jobs in 2024. December’s job growth exceed the monthly average for 2024 of 186,000. Healthcare and retail were leading areas of job growth in December. See details at BLS.gov.

Revolving credit declined in November 2024

Revolving credit owed declined at a seasonally adjusted annual pace of 12% in November. November is usually one of the heaviest months for the use of revolving credit. The way seasonal adjustment works, the actual amount of revolving credit outstanding increased during November, but by much less than would typically be expected at the start of the holiday shopping season. The vast majority of revolving credit is credit card balances. Consumers didn’t completely turn their backs on using credit during November, as nonrevolving credit rose at a seasonally adjusted annual rate of 2.0%. See details at FederalReserve.gov.

Bankers sue government to stop overdraft fee cap

The American Bankers Association (ABA) is suing the Consumer Financial Protection Bureau (CFPB) to block the CFPB’s recently announced limit on overdraft fees. The fee cap was issued on the grounds that overdraft fees are a form of finance charges for credit issued by banks to consumers. The ABA argues that overdrafts are not credit and should not be treated as finance charges. The lawsuit also argues that the CFPB overstepped its legal authority in issuing the fee cap. See the news release at ABA.com.

CFPB makes final push to sideline medical debt

The CFPB has announced a new rule that would exclude information about medical debt from credit reports. This would potentially affect 15 million consumers with $49 billion in unpaid medical debt. However, the measure wouldn’t absolve consumers from that debt. They would still be legally obligated to pay it, but it would not appear on their credit reports. Critics of the move say it could restrict lending because it would make credit information less reliable. In any case, it’s questionable whether the measure will survive when the new presidential administration comes in. See report at Reuters.com.

Mortgage rates continue to trend upward

30-year mortgage rates continued to surge toward 7%, rising by two basis points last week to 6.93%. This was the fourth consecutive week mortgage rates rose, with 30-year rates rising by 33 basis points. Overall, 30-year rates are up by 85 basis points since bottoming out at the end of September 2024 and are 27 basis points higher than a year ago. 15-year rates also rose for a fourth straight week, increasing by one basis point to reach 6.14%. See mortgage rate detail at FreddieMac.com.

Mortgage credit standards loosened in December 2024

Mortgage credit availability rose by 0.7% in December, reaching 96.6 on the Mortgage Credit Availability Index (MCAI), per the Mortgage Bankers Association. A higher index reflects looser credit standards. The Conventional MCAI increased by 1.3%, driven by more adjustable-rate mortgage (ARM) and cash-out refinance options for borrowers with strong credit, while the Government MCAI remained unchanged. The Jumbo MCAI climbed 2.3% to its highest level since August 2024, offsetting a 0.7% drop in the Conforming MCAI. Joel Kan, MBA’s Deputy Chief Economist, attributed the rebound in conventional credit to these expanded offerings for creditworthy borrowers. See news release at MBA.org.

Bond prices plunge as interest rates rise

Yields on bonds around the globe have been falling sharply as inflation concerns have mounted. The rate on 10-year US bonds rose to 4.7%, its highest since April 2024. Bonds are traditionally a haven in uncertain times, but not when the uncertainty involves a return of inflation. Experts say investors are selling bonds out of concern that plans for new trade tariffs and tax cuts could lead to higher inflation and an expanding deficit. Both would drive down the value of US bonds. This would affect consumers because loan rates, such as on mortgages, often respond more closely to moves in the bond market than to Fed rate changes. See article at Reuters.com.

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Wall Street completes best 2 years since the late 1990s

The S&P finished 2024 with a gain of over 20% for the second consecutive year. This is the first time that has happened since 1997-1998. Investment analysts expect the stock market to continue to rise in 2025 but at a more moderate pace. The median forecast among strategists tracked by Yahoo Finance is a 12% gain in the S&P 500 in 2025. Among the concerns that may weigh on the market are the high valuations of stock prices and a renewed threat of inflation. See article at Yahoo.com.

Holiday spending up modestly in 2024

Mastercard’s SpendingPulse report showed that non-automotive retail sales from November 1 through December 24 were up by 3.8% from the same period a year earlier. That period captures activity during the holiday shopping season. A 3.8% increase represents only a slight improvement after adjustment for the 2.7% inflation rate over the past year. Restaurant spending was up 6.3% from a year ago, showing consumers demand more experiences than merchandise. Online shopping grew by 6.7% year-over-year, compared with 2.9% growth for in-store sales. See report highlights at Mastercard.com.

Credit card write-offs rose sharply in first 9 months of 2024

Credit card companies wrote off $46 billion in bad debts in the first three calendar quarters of 2024. That was a 50% increase over the same period in 2023. Credit card companies write off seriously delinquent payments when they conclude that the cost of trying to collect on them is likely to exceed the money they’d be able to recoup. The level of credit card write-offs is the highest since 2010. That was when the economy was still struggling to recover from the Great Recession. See article at PYMNTS.com.

Mortgage rates rise for third straight week

30-year mortgage rates rose by six basis points at the end of December 2024 to 6.91%. This was the third consecutive weekly increase, during which time 30-year rates have risen by a total of 31 basis points. 30-year rates are now higher than they’ve been since early July 2024 and 83 basis points higher than at the end of September. 15-year mortgage rates also rose for a third straight week, climbing by 13 basis points to re13%. See rate details at FreddieMac.com.

Improvement in consumer confidence proves short-lived

After rising in October and November 2024, the Conference Board’s Consumer Confidence Index took a sharp downturn in December. The overall index fell by 7.2% during the month. The index component that considers current conditions was barely affected, falling by less than 1%. However, the part of the index which looks forward to near-term conditions plunged by 13.4%. This left the Expectations Index at 81.1. As a result, the Expectations Index may be close to falling below 80, a level traditionally associated with recessions. See details at Conference-Board.org.

Government sues Rocket Mortgage over alleged kickbacks

The Consumer Financial Protection Bureau (CFPB) has sued Rocket Mortgage and The Jason Mitchell Group for allegedly rewarding real estate agents and brokers for steering clients towards Rocket Mortgage. The Mitchell Group is a network of real estate companies operating across 41 states. The CFPB alleges that Rocket Mortgage would refer prospective home buyers to the Mitchell Group’s agents and brokers in return for influencing their clients to obtain their mortgages through Rocket Mortgage. As part of the plan, Rocket discouraged agents and brokers from providing their clients with information about mortgage products not offered by Rocket. This included information about down payment assistance programs. See details at ConsumerFinance.gov.

Pending home sales continued to rise in November

The National Association of Realtors’ Pending Home Sales Index (PHSI) rose 2% in November 2024. This was the fourth straight monthly increase for the PHSI. The PHSI is based on signed purchase contracts (not closed sales) and is considered a leading indicator of home-buying activity. The volume of signed contracts increased in the South, Midwest, and West in November, with the Northeast being the only region that showed a monthly decline. All four regions showed a rise in home-buying activity over the past 12 months. The West had the most significant increase over the past year, with an 11.8% rise in signed purchase contracts. Notably, this pick-up in home buying began before mortgage rates started rising in December. See details at NAR.Realtor.

Home prices show modest progress in late 2024

The latest monthly data from the Federal Housing Finance Agency’s seasonally adjusted House Price Index show that home prices rose in the US by 0.4% in October 2024 and by 4.5% from the previous year. However, that rate of year-over-year growth was slower than the previous year. Prices rose in all nine geographic regions tracked by the index over the past 12 months. The Middle Atlantic region showed the most substantial price growth over the past year, with a 7% increase. See details at ABA.com.

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2024 Q3 GDP growth strong in final estimate

The Bureau of Economic Analysis issued its final estimate of US Gross Domestic Product for the third quarter with a positive surprise. The US economy grew at an inflation-adjusted annual pace of 3.1%, an improvement over the prior estimate of 2.8% and an uptick from the second quarter’s 3.0% growth rate. Upward revisions to exports and consumer spending figures were the leading reasons for the improved growth rate. See GDP report at BEA.gov.

Key inflation measure eased in November 2024

The Personal Consumption Expenditures (PCE) price index slowed in November. The PCE price index is the Federal Reserve’s preferred measure of inflation. The index rose by just 0.1% in November, after a 0.2% increase in the two previous months. The year-over-year increase was up slightly, from 2.3% to 2.4%. However, this increase was due to activity in prior months and not to the most recent trend. Core inflation, which excludes the energy and food sectors, also eased in November. The core PCE price index was up by 0.1% after rising by 0.3% in each of the prior two months. See personal income report at BEA.gov.

Mixed consumer debt performance in November 2024

Consumer debt mix showed signs of strain but with some improvement last month. Rates of serious delinquency declined slightly. The rate of serious delinquency on unsecured personal loans increased, while it remained unchanged for credit cards. However, serious delinquency rates for subprime customers increased for auto loans, personal loans, and credit cards. Consumers continued to show an appetite for additional debt. The average balance on credit cards and personal loans increased, as did the average amount of new auto loans. See details at TransUnion.com.

Government sues banks over failure to protect customers

Three of America’s biggest banks are being sued by the Consumer Financial Protection Bureau (CFPB) for failing to protect customers from fraud adequately. The three banks are JPMorgan Chase, Bank of America, and Wells Fargo. Those banks are co-owners of Zelle, a peer-to-peer payment network. The CFPB alleges that Zelle’s identity verification methods were so weak that scammers could easily open fraudulent accounts and divert payments meant for legitimate users. Despite receiving hundreds of thousands of complaints about fraudulent activity on Zelle, the banks did not use the information to prevent continued fraud. Because the banks did not share information about scammers, those criminals could move from one bank to another, repeating the same crimes. See news release at ConsumerFinance.gov.

Holiday credit spending off to a slow start

The November 2024 VantageScore CreditGuage showed modest credit activity for the month. This muted credit at the traditional start of the holiday shopping season could spell trouble for retail spending. Overall, consumer credit balances shrank in November 2024, and credit card balances increased only slightly. New credit card account originations rose somewhat in the month but are down year-over-year. See report at VantageScore.com.

CFPB sues Walmart over opening bank accounts for drivers

The CFPB is suing Walmart for forcing delivery drivers to pay more than $10 million in fees to access their pay. The suit alleges that Walmart used the drivers’ personal information to open accounts in their names at Branch Messenger, a fintech company. Walmart then deposited their pay into those accounts without the drivers’ consent. Drivers were threatened with termination if they didn’t want to use Branch accounts. This resulted in the drivers having to pay fees to transfer the money to accounts of their choice. See news release at ConsumerFinance.gov.

Mortgage rates continue to climb

30-year mortgage rates rose by 13 basis points last week to 6.85%. It was the second consecutive week in which mortgage rates rose, for a total increase of 25 basis points. The recent surge has wiped out the benefit of three straight weeks of falling mortgage rates that preceded it. 30-year rates are now the highest since mid-July 2024 and 24 basis points higher than when the year began. Fears that inflation may be more persistent than once thought have contributed to the climb in mortgage rates. These fears were bolstered when the Fed revised its inflation estimates for the next two years upward after last week’s meeting. See rate details at FreddieMac.com.

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The Federal Reserve delivered one of the most unpopular rate cuts in recent history at the December 18 meeting, the last in 2024. The Federal Open Market Committee (FOMC) announced a 0.25% rate cut. The news was widely expected, yet the stock market’s reaction was strongly negative. The FOMC is the subgroup of the Federal Reserve that makes monetary policy decisions.

The sour mood among investors is less about the rate cut and more because of the Fed’s updated financial projections. Those projections show inflation may slow the pace of rate cuts in 2025. This change in outlook is a reminder of the limits of the Fed’s power to control inflation.

The Fed shares changing expectations

People expected a 0.25% rate cut, and that’s what they got. It’s what they didn’t expect that was the problem.

Once a quarter, the FOMC releases a set of economic projections. These show the Fed’s expectations for the next few years. They include what the Fed expects from economic growth, the job market, inflation, and the interest rates that the Fed sets.

In September 2024, the Fed’s projections indicated that it expected the Fed funds rate to end 2024 at 4.4%. The Fed’s rate cut to 4.25% to 4.50% on December 18 is consistent with that expectation. However, the updated economic projections released on December 18 differed significantly from the previous set. For one thing, FOMC now expects the Fed funds rate to be 3.9% at the end of next year. The September projections expected the rate to fall to 3.4%.

There was also a change in expectation for where rates are projected to be by the end of 2026. Whereas the FOMC had previously projected them to fall to 2.9%, they now expect them to end 2026 at 3.4%.

In short, over the next couple of years, the Fed still expects the rate to fall, but not as far or as fast as previously thought.

Markets were not satisfied with the rate cut

Rate cuts are usually catnip for investors. But not this time.

The S&P 500 fell by 3% following the Fed’s announcement. Bond rates rose on December 18, which means bond prices fell.

As much as investors like rate cuts, the 0.25% cut was fully expected and already reflected in market prices. However, the FOMC’s updated economic projections showed that it expects future rate cuts to be milder than previously planned. That’s what sent investors yelling, “Sell!”

A reminder of the limits to the Fed’s power

This recent chain of events was a reminder that while the Fed sets monetary policy, it does not do so in isolation. It has to make its decisions in the context of economic developments.

In this case, the Fed accounted for recent signs that inflation may be more stubborn than expected. Faced with that and the prospect of inflationary tariffs next year, the new economic projections show less progress expected toward driving inflation down.

That, in turn, explains the Fed’s expectation that it won’t be able to cut rates as aggressively as previously thought.

Smaller interest rate cuts implications for consumers

Where does this outlook for more stubborn inflation and slower rate cuts leave consumers? Here are some things to expect:

• Get used to the current level of mortgage rates. At 6.72%, 30-year mortgage rates are about a full percentage point lower than when they peaked at the end of October 2023. However, all that progress was made in the last two months of 2023. Since then, mortgage rates have fluctuated but are now higher than they were when this year began. While inflation seems a threat, don’t expect mortgage rates to make much sustained downward progress.
• Savings and CD rates may stay higher for longer. Once the Fed started cutting interest rates, savings account and CD rates started coming down. If your bank has been especially quick to cut rates, it may have overshot the mark, given that the Fed now expects fewer cuts in 2025. This might be a good time to shop around and see if you could do better with another bank.
• Credit card rates may depend more on credit conditions than on the Fed. There was some hope that big interest rate cuts could bring some relief to people with credit card debt. Now, it seems those cuts may be milder than previously expected. Improving your credit score might be a surer way of getting a lower credit card rate than counting on Fed rate cuts to make a difference.
• No free ride for investments. Both stocks and bonds get a lift from falling interest rates. With fewer rate cuts on tap for 2025, stock gains may depend more on individual company earnings performance than an across-the-board boost from falling rates.

The Fed’s change in outlook shows how unpredictable the economy can be. The Fed may control specific interest rate decisions, but they cannot predict with certainty where those rates will be in a year.

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U.S. household wealth rises in Q3 2024

The total net worth of American households posted its fourth consecutive quarterly increase in the third quarter of 2024. Household wealth grew by $4.77 trillion in the quarter, to reach $168.8 trillion. U.S. household wealth has increased by $17.27 trillion over the past year and nearly $26 trillion over the past two years. Gains in stock prices, fueled by falling interest rates and continued economic growth, were the primary reason for the rise in net worth. Both assets and debt rose for households, with asset growth rising more quickly to create a net increase in wealth. See data release at FederalReserve.gov.

CFPB spotlights the high cost of borrowing to gamble

The Consumer Financial Protection Bureau (CFPB) warned that people who use credit cards to gamble may be adding excessive costs to the risk of loss. A CFPB study found that cash advance transactions on credit cards tend to rise in states that have legalized gambling. Credit card companies often treat charges to place bets as cash advances. There is a particular spike in cash advance transactions when gambling is first legalized. This is a problem because cash advances on credit cards are expensive. They typically incur higher interest rates than purchase transactions. There also may be a fee for the cash advance. $10 is the minimum fee, normally. This is a considerable percentage of a small transaction. For example, a $10 fee on a $20 bet would mean the gambler is paying $30 to make that bet. With this added cost, they may lose money even if they win the bet. See announcement from ConsumerFinance.gov.

Bankers attempt to block cap on overdraft fees

Not long after the CFPB announced a new rule that could limit some overdraft fees to $5, an assortment of groups representing banks sued to stop the fee cap. The new rule would apply to banks with over $10 billion in assets. That would cover 80%+ of the bank deposits in the U.S. The bankers groups claim the CFPB exceeded its authority in issuing the new rule. In seeking to block the overdraft fee cap, bankers have argued there could be harmful impacts for consumers. They point out that limiting overdraft fees could reduce the availability of overdraft protection, cause some customers to lose their bank accounts, or force increases in other fees. See article at USNews.com.

Fed cuts rates again but signals fewer cuts in 2025

The Federal Open Market Committee (FOMC), the subgroup of the Federal Reserve that makes monetary policy decisions, announced a rate cut on December 18, 2024, following its latest meeting. The FOMC cut rates by 25 basis points to 4.25% to 4.50%. This is the third consecutive meeting in which the FOMC has cut rates, for a total drop in the Fed funds rate of 1%. However, the FOMC released updated economic projections showing it expects to cut rates by less than anticipated next year. When it issued the previous set of forecasts, it showed the FOMC anticipated another 1% drop in the Fed funds rate next year. The new projections show a total rate cut of 0.5% in 2025. See details at FederalReserve.gov.

Incomes are up but debt still a problem

A study by H&R Block found that most generations beat inflation last year. Younger adults, in particular, showed significant gains, with Gen Z showing incomes growing by 30% last year. Millennials showed 11% income growth, and Gen X 5%. All three exceeded the inflation rate of 3.4% over the same period. Only Baby Boomers, with 2% average income growth, lagged behind inflation. Many in this generation have higher incomes or are already retired, which can limit their income growth. Despite substantial income gains, debt remains a problem. The survey found that 1 out of every 2 Americans has credit card debt. Of those that do, 2 out of 3 say that debt is unmanageable. See details at HRBlock.com.

Mortgage rates increase

After easing for three straight weeks, 30-year mortgage rates increased sharply last week. They rose by 12 basis points to 6.72%, while 15-year mortgage rates rose by 8 basis points to 5.92%. 30-year rates are now 64 basis points above where they were at the end of September 2024 and 11 basis points above when the year began. Signs of stronger inflation in last week’s Consumer Price Index and Producer Price Index reports may have sparked the upturn in mortgage rates. See rate details at FreddieMac.com.

Store-branded credit cards harmful to consumers

The CFPB released new research documenting concerns about how store-branded credit cards may harm consumers. Store-branded cards are those issued by retailers for use specifically in their stores, as opposed to general-purpose credit cards. The study found that 90% of store-branded cards had interest rates of over 30%, compared with just 38% of general-purpose cards. Also, since those cards often have looser approval standards, they may be more likely to extend credit to people who cannot manage it responsibly. See report highlights at ConsumerFinance.gov.

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Inflation increases in November 2024

The Consumer Price Index (CPI) rose by 0.3% in November. That was an upturn from October’s 0.2% and the highest monthly increase since April. The core inflation rate was also 0.3% in November. The year-over-year inflation rate was 2.7%, up from 2.6% the prior month. This leaves the CPI close to the Federal Reserve’s 2% target but moving away from rather than towards that target. However, the CPI is often higher than the Personal Consumption Expenditures price index, the Fed’s primary indicator to track inflation. See CPI report at BLS.gov.

Producer prices rise in November 2024

The Producer Price Index (PPI) rose by 0.4% in November. This was the largest monthly increase since June. The PPI tends to be quite variable from month to month, but if continued, this rate of increases in producer prices would start to put more upward pressure on consumer prices. This is likely to add to inflation concerns after the previous day’s news that the Consumer Price Index had also gained momentum in November. Year-over-year, the PPI is up by 3.0% over the past 12 months, the highest 12-month rate in over a year. See details at BLS.gov.

Consumer borrowing surged in October 2024

The latest Federal Reserve report on consumer credit usage showed a significant increase in the amount owed in October 2024, led by revolving credit. The amount of revolving credit, most of which is credit card debt, showed the greatest monthly increase since May. October’s rise in revolving credit was more than three times the amount added in October of last year. Overall, consumer credit rose at a seasonally adjusted annual rate of 4.5% in October. Non-revolving credit rose at a seasonally adjusted annual rate of just 1.1%, but revolving credit rose at 13.9%. This leaves consumers with over $5.1 trillion in non-mortgage debt. That’s a record high, leading into the start of the holiday shopping season. November and December are usually the biggest months for revolving credit increases. See data at FederalReserve.gov.

Credit card late fee cap proposal remains blocked

A federal judge rejected a request to lift his earlier court order that has blocked a limit on credit card late fees from going into effect. The rule, proposed by the Consumer Financial Protection Bureau (CFPB), would have capped fees for late credit card bill payments at $8. The CFPB claims that higher late fees are an excessive penalty for people who are habitually late with their payments. Critics of the fee cap say it might raise other costs for credit card customers and restrict credit availability. See article at MSN.com.

Spending expectations still exceed income growth

Consumers expect spending to rise by 4.7% over the next year. That’s according to the latest Survey of Consumer Expectations from the Federal Reserve Bank of New York. The 4.7% expected increase in spending is down by 0.2% from the prior month and is the lowest expected increase since April of 2021. Still, it remains above pre-pandemic levels. Perhaps more significantly, it exceeds consumers’ expectations for growth in income and inflation. Consumers expect household income to rise by 3.1% and a 3% inflation rate over the next year. See details at NewYorkFed.org.

Mortgage rates decline for third week

30-year mortgage rates declined for a third consecutive week. They fell by nine basis points to reach 6.6%. 15-year rates fell by 12 basis points to 5.84%. Despite the recent easing, 30-year rates are still 0.52% higher than at the end of September. 15-year rates experienced a similar surge in October and November 2024 and remain 0.68% above where they were at the end of September. See details at FreddieMac.com.

Mortgage applications increased last week

After adjusting for seasonal differences, total mortgage applications rose 5.4% last week. The rise was driven by an increase in refinancing applications, which increased to 46.8% of total applications, up from 38.7% in just one week. Meanwhile, purchase applications declined on a seasonally adjusted basis last week, falling by 4%. See details at MBA.org.

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Nearly 5% Thanksgiving online shopping transactions fraudulent

TransUnion reports that 4.6% of global online shopping transactions from Thanksgiving through Cyber Monday this year were suspected to be fraudulent. There is some good news, though. The proportion of suspected fraudulent transactions globally was down by 6% from last year. Suspected fraud is more common before the holiday shopping season kicks off. Some 7.5% of global e-commerce transactions in 2024 before Thanksgiving were suspected to be fraudulent. Similar trends were seen in the US, though the numbers were generally lower. 4.2% of e-commerce transactions from Thanksgiving through Cyber Monday were suspected to be fraudulent, down by 5.8% from last year. Before Thanksgiving, 7.1% of US e-commerce transactions were suspected of fraud. See details at TransUnion.com.

Five cybersecurity predictions for 2025

Experian’s Data Breach Industry Forecast includes five predictions for the coming year. These predictions highlight threats that consumers and businesses must protect against in 2025. The five predictions are: 1) teens and young adults will increasingly become major perpetrators of online fraud; 2) internal cyber fraud by employees will continue to grow; 3) electrical power will increasingly become a target of attacks, as the growing use of artificial intelligence requires more energy; 4) predators will eat their own, as more and more hackers choose other hackers as their targets; 5) more sophisticated identification methods will come into use, as standard encryption becomes obsolete. See news release at ExperianPLC.com.

Job creation surged in November 2024

The monthly jobs report from the Bureau of Labor Statistics showed that 227,000 new jobs were created in November 2024. That’s up significantly from the 36,000 new jobs in October 2024, surpassing the 12-month average of 186,000. In addition, previous employment estimates for September and October increased by a combined total of 56,000. The strength of this month’s job report is likely to fuel speculation over whether the Fed will pause its planned rate cut when it meets later this month. The Fed’s previous economic forecast showed that it is expected to lower the Fed funds rate by an additional 0.25% by the end of the year. However, the strength of the job market and recent concerns about the persistence of inflation may mean the Fed can afford to slow its rate-cutting. See details at BLS.gov.

2025 Black Friday sales up from 2024

Mastercard reported that US non-automotive Black Friday retail sales were up by 3.4% over last year. Considering the 2.6% inflation rate for the past year, this means that sales volume was up by only 0.8%. Online sales showed much more substantial growth than in-person sales. Online sales were up by 14.6% over last year’s Black Friday, while in-store sales were up by just 0.7%. Jewelry, electronics, and apparel were identified as the leading holiday shopping sectors. See news release at Mastercard.com.

Net job openings remained steady in October 2024

The latest Job Opening and Labor Turnover survey showed that total job openings in the US remained essentially unchanged in October. There were 7.7 million job openings as of the last business day of the month. There was also a balance between new hires and people leaving their jobs during October, with 5.3 million people in each category. The total number of job openings still exceeds the number of people looking for work, but the gap has been closing. There are now 7 million job seekers and 7.7 million job openings. See report at BLS.gov.

Mortgage rates drop for second week in a row

30-year mortgage rates dropped by 0.12% last week to reach 6.69%. This is the first substantial drop in rates in more than two months. It breaks 30-year rates out of the narrow range they had fluctuated in during November. 15-year rates also dropped significantly last week, falling by 0.14% to 5.96%. Even so, 30-year rates are still 0.61% above where they were at the end of September. 15-year rates are 0.80% higher than at the end of September 2024. See rate details at FreddieMac.com.

The CFPB helps customers reclaim $1.8 billion

The Consumer Financial Protection Bureau (CFPB) is to distribute $1.8 billion of improperly charged fees to 4.3 million customers of two credit repair schemes. The reclaimed fees result from the CFPB’s legal action against Lexington Law and CreditRepair.com. They represent the largest ever distribution from the CFPB’s victim’s relief fund, which consists of receipts of civil penalties paid by companies that violate consumer protection laws. See news release at ConsumerFinance.gov.

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