This Day On The Street
Continue to site right-arrow
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
TheStreet Open House

Consumer Borrowing Power Weakens For First Time In 2011

TheStreet, Inc. (Nasdaq: TST), a leading digital media company, released the August Credit Power Index (TM) showing that the consumer interest climate worsened for the first time this year after seven straight months of improvement.

A sharp decline in certificate of deposit rates below already-historic lows reversed the positive consumer rate trend as measured by the Credit Power Index, a metric produced jointly by TheStreet’s Rate-Watch and MainStreet divisions to measure the “squeeze” on consumers between the interest rates paid on deposits versus the interest rates charged on loans.

“The national Credit Power Index may have hit bottom last month,” says Rate-Watch General Manager Rachelle Zorn, suggesting that the great consumer environment at banks may be coming to a close.

At the end of August, interest paid on 12-month CDs had fallen four basis points to settle at 0.43%, 36-month CDs dropped 12 basis points to less than 1%, and 48- and 60-month CDs saw similar big drops, according to Rate-Watch data used to compile the Credit Power Index. Rate-Watch maintains the world’s largest database of rates from more than 90,000 financial locations across the U.S.

The downturn in deposit rates meant that the Credit Power Index , which tracks the overall interest rate climate for consumers, went up for the first time since December 2010. The index is calculated by subtracting the interest paid on CDs at four terms from the rates charged on four loan products at corresponding terms. The lower the index, the more consumer-friendly the rate climate is. (See MainStreet’s infographic for details on how the index is calculated.)

The good news revealed by the August index is that loan rates also fell, though not as steeply as deposit rates. The two short-term loan products in the Credit Power Index -- personal unsecured loans and 36-month home equity loans -- fell eight basis points each for the month of August, the latter settling at 6.54%. Meanwhile, 48-month auto loans and 60-month adjustable-rate mortgages fell only slightly, and now stand at 4.58% and 3.14%, respectively.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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 17,976.31 +263.65 1.49%
S&P 500 2,086.24 +25.22 1.22%
NASDAQ 4,947.4410 +56.2220 1.15%

Partners Compare Online Brokers

Free Reports

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