Finance
Middle-income Americans feel more optimism about finances and economy’s direction: survey
Middle-income Americans could be earning more on savings, according to a recent Santander survey. (iStock)
Although inflation is still a top concern, middle-income Americans said they’ve gotten used to higher prices and feel better equipped to handle their finances, according to a recent Santander survey.
Additionally, worries about an economic recession have taken a backseat for many Americans as they begin to accept the high-interest rate environment as the new normal. The number of respondents who expected a recession in the next 12 months dropped from 69% to 60%.
Consumer confidence hit a record high of 79.4 in March, the highest since July 2021, according to the University of Michigan’s benchmark Consumer Sentiment Index. The number reflects the improved consumer outlook that inflation will continue to soften and that personal finances will also be lifted as the effects of high prices and expenses on living standards ease.
However, consumers have had to make deep budget cuts to survive in a high-cost environment—67% of respondents said they cut out major purchases such as vacations, vehicles and home repairs, according to the survey.
“While middle-income households have had to navigate higher prices due to inflation, it is encouraging to see consumers taking positive steps to manage their finances and adjust their household budgets,” Tim Wennes, CEO of Santander U.S., said.
If you are struggling with high inflation, you could consider taking out a personal loan to pay down debt at a lower interest rate, reducing your monthly payments. Visit Credible to find your personalized interest rate without affecting your credit score.
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Americans can earn more on savings
Despite 74% of respondents saying they believe they are on the right path to financial prosperity, 60% are missing out on an opportunity to grow savings in a high-rate environment, with 56% still earning less than 3% interest, according to the survey.
“At the same time, many continue to miss out on the opportunity to leverage the current rate environment to grow their savings,” Wennes said. “For most consumers, this is the first time in a generation when they can be earning meaningful interest on their hard-earned savings.”
The Federal Reserve has raised interest rates 11 times since March 2022, pushing the federal funds rate to a 22-year high of 5.25% to 5.5% to lower soaring inflation.
Middle Americans could offset high costs by moving money into higher-yielding accounts like certificates of deposit (CD) and high-yield savings accounts. With CDs, cash is deposited for a fixed period, ranging from a few months to several years. In exchange, those funds earn a higher interest rate when compared to regular savings accounts. A high-yield savings account, also known as a high-interest account, offers higher interest rates on deposits than a traditional one. The interest rate is an annual percentage yield (APY) that fluctuates. However, these accounts allow you to make deposits and withdrawals.
If high-interest debt is putting a dent in your finances, you could consider paying it down with a personal loan at a lower interest rate. Visit Credible to get your personalized rate in minutes.
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Housing is still out of reach for many
The combination of high borrowing rates and home prices has put the dream of homeownership on ice for many would-be homebuyers.
The average 30-year fixed-rate mortgage has not dropped below 6.6% this year. Home prices recorded another gain in January and are now 6% above their level this time last year, up from 5.6% rise last month, according to the latest S&P CoreLogic Case-Shiller Indices report.
Higher mortgage rates and home prices mean that 20% of Americans spend roughly 30% of their paychecks on monthly home loan payments and 10% spend more than half of their pay on their mortgage, according to a recent NewHomesMates.com survey.
“When you’re saving up for a house, it can be hard to justify spending money on other things,” a NewHomesMate spokesperson said in a statement. “But the unprecedented high costs of today’s real estate are forcing potential buyers to make some extreme decisions. Not only are they slashing leisure spending and travel, but many are also cutting back on basic items like groceries.”
Homebuyers can find the best mortgage rates by shopping around and comparing options. You can visit an online marketplace like Credible to compare rates, choose your loan term and get preapproved with multiple lenders at once.
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Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
The Federal Reserve held interest rates steady at its Wednesday meeting and did not disclose a timeline for when it will lower them. (iStock)
The Federal Reserve is keeping rates steady at its targeted range of 4% to 4.25% and is waiting to see how President Donald Trump’s administration’s tariffs will impact the economy.
For now, Federal Reserve Chair Jerome Powell said that the central bank is in the right place to monitor the impact tariffs will have on the economy before making a decision on further interest rate cuts. For now, the mandate remains the same: get inflation to a 2% target rate. The decision comes even with a negative first-quarter GDP reading. US GDP decreased at an annual rate of 0.3%. This was the first quarter of negative GDP growth since the first quarter of 2022.
“While gross domestic product recorded a mild decline in the first quarter, prompting concerns about a recession, broader economic data underscore ongoing resilience,” the National Apartment Association’s new Vice President of Research, George Ratiu, said in a statement. “The main risk to economic activity is continuing financial pressure on households coming from higher monthly bills, combined with the looming threat of rising layoffs.”
The Fed had anticipated two interest rate cuts for this year, but the impact of how President Trump’s tariffs will play out has derailed this plan. Powell said that the Fed is in a good place to think out policy rates to respond promptly and to potential developments, including rate cuts or holding them steady.
“Despite heightened uncertainty, the economy is still in a solid position,” Powell said at a press conference on Wednesday. “The unemployment rate remains low, and the labor market is at or near maximum employment. Inflation has come down a great deal but has been running somewhat above our 2% longer-run objective.”
If you are struggling with high inflation, consider taking out a personal loan to pay down debt at a lower interest rate, reducing your monthly payments. Visit Credible to find your personalized interest rate without affecting your credit score.
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Mortgage rates won’t budge in time for summer home buying
With no rate cut in sight, housing affordability will remain a central challenge for most Americans, whether they are looking to buy or rent, according to Raitu.
Mortgage rates are likely to remain in the high 6% range they’ve held for the last six months without action from the Fed. Home prices are roughly 50% higher than they were in 2019. That means that with current mortgage rates, buyers are facing a $2,200 monthly payment on a median-priced home.
”The best-case scenario for mortgage rates is to hover just above the 6% mark for the next two years,” said Victor Kuznetsov, Imperial Fund Asset Management co-founder and managing director. “The average American household has adopted a wait-and-see strategy regarding mortgage rates, as they also seek to reduce their monthly consumer spending amid current economic uncertainty.
“The good news is that employment and home prices remain strong, so families will be in a better position to buy or refinance a home in the coming months, especially if rates dip below 6%,” Kuznetsov continued.
Mortgage rates are expected to remain flat through the summer housing market. The Mortgage Bankers Association forecasts that the Fed will resume cutting short-term rates in the year’s second half. “Heading into the Fall, if inflation cools as expected, mortgage rates will begin to dip slowly and steadily, finishing out 2025 around 6%,” Voxtur CEO Ryan Marshall said.
If you want to become a homeowner, you can find the best mortgage rates by shopping around. Visit Credible to compare your options without affecting your credit score.
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Lending picks up despite higher rates
Some buyers aren’t waiting for interest rates to drop, and lending has picked up recently as consumers readjust their outlook and expectations, according to Michele Raneri, TransUnion vice president and head of U.S. research and consulting.
“While the possibility still exists for potential rate cuts later this year, the economic picture is complicated, and it’s too early to know if or when those cuts might happen,” Raneri said. “We’re starting to see some positive signs in lending – mortgages, home equity loans and auto financing are showing signs of life after a slow couple of years.
“However, these gains will likely remain incremental until rates begin ticking down, as many borrowers are reluctant to take on a loan at today’s rates, particularly if they currently have a loan at a significantly lower rate,” Raneri continued.
If you’re worried about the state of the economy, you could consider paying down high-interest debt with a personal loan at a lower interest rate. Visit Credible to speak with a personal loan expert and get your questions answered.
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Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
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