Consumer Spending Habits and Mortgage Lending Data
Highlighting Two Reports: from PSCU and the FFIEC
By Roy Urrico
Finopotamus aims to highlight white papers, surveys and reports that provide a glimpse as to what is taking place and/or impacting credit unions and other organizations in the financial services industry.
PSCU Payments Index
St. Petersburg, Fla.-based PSCU , billed as “the nation’s premier payments credit union service organization (CUSO),” published the June 2022 edition of its PSCU Payments Index, the goal of which is to provide information and insights to help credit unions and banks make informed, strategic decisions on the road ahead.
The latest report finds continued strong consumer purchasing activity amidst ongoing inflationary pressures, while PSCU’s Deep Dive section of the report highlights consumer payment trends during the rapid rise of inflation. The report looked at contributing factors of spending growth over the past 17 months, in which the rate of inflation has risen from 1.4% to 8.6%.
PSCU cited the U.S. Department of Labor’s June 10 update in which the Consumer Price Index (CPI) increased 1.0% during the month of May, bringing the 12-month rate of inflation to 8.6% – the highest level in more than 40 years. Top growth sectors included shelter, gasoline and food. PSCU also referenced a U.S. Bureau of Labor Statistics report finding that the May 2022 unemployment rate was again unchanged from the prior two months at 3.6%, with more than 400,000 jobs added to the economy for each of the past 12 months.
PSCU noted while this continued combination of strong job growth and low unemployment will likely fuel further consumer spending, inflationary pressures are driving lower real average hourly earnings and are influencing consumer card preference (credit versus debit), as well as sector activity. In PSCU’s May results, credit card purchases were up 15% over 2021, while debit card purchases were up 6%.
“Overall consumer spending growth remained strong throughout May 2022, with the gasoline sector experiencing the top growth rates in both credit and debit as fuel prices remain elevated,” said Brian Caldarelli, executive vice president and chief financial officer at PSCU. “The Consumer Price Index increased this month as we continue to face the highest level of inflation in more than 40 years. While the Federal Reserve announced another rate increase this week, a pause in the series of aggressive rate hikes is unlikely until inflation returns to an acceptable level. In this month’s Deep Dive, we explore the evolution of consumer behavior and spending growth as inflation has steadily surged over the past 17 months.”
Some key takeaways from the PSCU Payments Index include:
· The Consumer Price Index increased on an annual basis to 8.6% in May, which was a 1.0% increase from April – and the highest level of inflation since 1981. The Fed increased interest rates by 75 basis points on June 15, its largest rate hike since 1994.
· Consumer spending on cards continues to be strong, with credit purchases up 15% and debit purchases up 6% year over year. Gasoline posted top growth rates for all sectors in both credit and debit purchases in May and will continue to grow in June as the U.S. average price has surpassed $5 per gallon. Travel and entertainment were second and third, respectively, for both credit and debit purchases in May.
· Consumer data indexed to January 2021 (when inflation was 1.4%) highlighted the trend of greater growth in credit purchases (over debit) beginning in May 2021 and continuing through May 2022. Influenced by multiple criteria including pent-up demand in travel and entertainment, countered by cooling of purchases in the goods sector, strong activity at restaurants and high inflation fueled by the energy sector, a trend expected to continue – and even widen – with waning consumer liquidity.
· The average credit card balance for May 2022 was $2,724, up 2.9% (or $76) year-over-year. May marked the third consecutive month in which year-over-year growth was over 2%. The credit card delinquency rate for May was 1.43%, 27 basis points lower than pre-pandemic May 2019 levels.
FFIEC Announces Availability of 2021 Mortgage Lending Data
The Federal Financial Institutions Examination Council (FFIEC) — which consists of six voting members from the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), the Consumer Financial Protection Bureau (CFPB) and the State Liaison Committee — announced the availability of data on 2021 mortgage lending transactions reported under the Home Mortgage Disclosure Act (HMDA) by 4,338 U.S. financial institutions.
Covered institutions include banks, credit unions, mortgage companies and savings associations. Companies, consumer groups, regulators and others use the HMDA data, a comprehensive publicly available information on mortgage market activity to assess potential fair lending risks and for other purposes.
The data also helps the public assess how financial institutions serve the housing needs of their local communities and facilitate federal financial regulators’ fair lending, consumer compliance, and Community Reinvestment Act examinations.
The Snapshot National Loan-Level Dataset, also recently released by the FFIEC, contains the national HMDA datasets as of May 1, 2022. Some key observations include:
· For 2021, the number of reporting institutions declined by about 3.1% from 4,475 in the previous year to 4,338.
· The 2021 data included information on 23.3 million home loan applications. Among them, 21.1 million were closed-end (with a stated date that the debtor must pay the complete loan and interest) and 1.8 million were open-end (allows access to home equity and funds use as necessary). Another 350,000 records are from financial institutions making use of Economic Growth, Regulatory Relief, and Consumer Protection Act’s partial exemptions and did not indicate whether the records were closed-end or open-end.
· The share of mortgages originated by non-depository, independent mortgage companies increased and, in 2021, accounted for 63.9% of first lien, one to four-family, site-built, owner-occupied home-purchase loans, up from 60.7% in 2020.
The FFIEC also released several other data products to serve a variety of data users:
· The HMDA Dynamic National Loan-Level Dataset, updated on a weekly basis to reflect late submissions and resubmissions.
· Aggregate and Disclosure Reports provide summary information on individual financial institutions and geographies.
· The HMDA Data Browser allows users to create custom tables and download datasets.
In addition, beginning in late March 2022, the FFIEC made available loan/application registers for each HMDA filer of 2021 data, modified to protect borrower privacy.