This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Consumer Banking Power at Its Best in Years


NEW YORK ( RateWatch) -- Massive job losses and widespread uncertainty led most American consumers to cut back on new debt during the recession, with debit cards supplanting credit cards as a preferred payment method and home and auto loans falling. But rock-bottom rates on the loan side are finally enticing some consumers to resume their borrowing ways. And some loan officers say that they're seeing increased demand for home loans as well.

" The low rates have definitely sparked some activity," says Greg Patton, assistant vice president of State Bank and Trust in Columbus, Ohio. "Up through early April was as low as I've seen it, but the last three to four weeks' activity has certainly picked up."

A new metric shows consumers are choosing the right time to start borrowing again. The interest rate climate for American consumers improved for the fourth straight month in April, with the Credit Power Index hitting its lowest level in almost three years. As of the end of April, the index stood at 22.98, the first time it's dropped below 23 since September 2008. It also represents a month-to-month drop of 32 basis points, the biggest one-month improvement since August.

The Credit Power Index tracks consumers' banking power by comparing the gap between certificate of deposit interest rates at four terms -- 12, 36, 48 and 60 months -- and the rates on selected loan products at the same terms (personal unsecured loans, home equity loans, new auto loans and adjustable-rate mortgages). The larger the disparity between loan and deposit rates, the higher the index will be, indicating how much consumers are getting squeezed by their banks. (See our graphic for a full explanation of the methodology.) While the index spiked during the recession as consumer banking power eroded, it has since seen moderate improvement on the strength of falling loan rates and relatively stable deposit rates.

As in recent months, all of the improvement in the index can be attributed to falling loan rates, further easing pressure on Americans seeking to borrow money.

"Again this month, the loan component was the lowest we have seen it since we started tracking this indicator in January of 2007," said RateWatch's chief operating officer, Bob Quinn.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,817.90 +7.84 0.04%
S&P 500 2,069.41 +5.91 0.29%
NASDAQ 4,754.8920 +41.9220 0.89%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs