“At the beginning of the year, there were many concerned about an economic shock at some point this year, but what we are seeing is quite different,” said Dr. Rikard Bandebo, Chief Strategy Officer and Chief Economist, on Yahoo! Finance’s ‘Asking for a Trend.’ “Consumers have finally begun to adapt to these new economic norms of higher interest rates, higher inflation, and a stickier jobs market.”
Bandebo shared his insights on how consumer credit health is stabilizing, and the years-long trend of worsening delinquencies has ended, demonstrating how consumers are finally adjusting to the new norm of interest rates.
April’s tax refunds were larger, about 11.5% higher year-over-year, signaling a shift in the data that hasn’t reversed. Bandebo noted after the refund bump, “the fact that we’re continuing to see that it’s flat, I think is a really good sign.”
Bandebo also reiterated that rising personal loan delinquencies are not a red flag: “Some of the risk has moved away from credit cards… because the newer loans are riskier and they’re moving more towards personal loans.” He concludes, “I don’t think it’s a bad sign for the economy at all. I just think it’s a shift in some of that risk.”
Mortgage and auto, Bandebo said, are the two largest signals of consumer health, often representing the largest payments households make. Both are showing clear improvement. On mortgages: “Since April, again, it’s pretty flat. And in fact, we saw in July, that it was down about 17% year over year.” On auto: “since April, it’s about 1% year over year… it was about 5% the 12 months prior.”
To hear more of Dr. Rikard Bandebo’s segment on consumer credit health with Yahoo! Finance, watch the full interview here.
