TheStreet (Nasdaq: TST ( TheStreet)), a leading digital financial media company, announced today its monthly Credit Power Index™ produced by its RateWatch division, continues to improve at a snail’s pace, seeing a drop of 8 basis points – indicating a tiny improvement for consumers in the month of February. The Credit Power Index, which launched in January, gauges the relative squeeze that banks put on American consumers by comparing the difference in the rates banks charge for loans against the interest they offer for deposits.

The slight drop in the index figure marks the third straight month that banks have eased their grip on consumers after three months of increases in late 2010. The combined index for February was 23.54.

The Credit Power Index is calculated by comparing the gap between certificate of deposit rates at four terms – 12, 36, 48 and 60 months – with 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.)

The good news is that the index has been improving for consumers more or less steadily since May 2009, falling about two points in aggregate interest rates since that time. The bad news is that this easing has come only after the index spiked considerably during the recession, with deposit rates plummeting more quickly than loan rates.

The result is that the interest rate climate remains significantly worse than it was pre-recession, with the index about four-and-a-half points higher than it was 4 years ago. So while we’re moving in the right direction, this month’s miniscule improvement means we still have a long way to go before consumers are back to the friendlier rate environment of 2007.

One of the more encouraging signs from February’s index is some positive movement on the deposit side, with CDs rising four basis points in the aggregate. That might not seem like much, but it suggests that deposit rates could finally be pulling out of the nosedive of the past few years. Just four years ago, you could get a 12-month CD with a 4% interest rate; today that kind of return is unthinkable, with rates struggling to stay above 0.5%. These rock-bottom deposit rates have been the biggest factor in the miserable rate climate for consumers, so it’s nice to see deposits finally heading in the right direction.

That said, a closer look at the data suggests that most of the turnaround on the deposit side took place with 60-month CDs, where rates rose from 1.64% to 1.7%. Meanwhile, 12-month and 36-month CDs dipped slightly, suggesting that banks are less optimistic about deposit rates recovering in the near future.

“Before this 60-month CD increase and a slight increase last month, we had seen 17 straight months of either declining or steady rates, with no increases over that period,” says Bob Quinn, chief operating officer of RateWatch. “We may have finally reached the bottom on this long-term rate.”

On the loan side, rates on unsecured and home equity loans each fell by seven basis points in February. Home equity loans in particular seem to be in something of a holding pattern, staying more or less steady around 6.7%. Meanwhile, rates on unsecured personal loans, which have declined at a fairly steady pace since the recession began, likewise show no sign of an imminent turnaround. While sluggish demand for loans is rarely a good economic indicator, it’s at least comforting that Americans are a little less eager to borrow money at exorbitant rates with no collateral.

Elsewhere in the world of loans, it remains a great time to finance a new car. The average interest rate for a 48-month auto loan fell four basis points, continuing a steady decline; the average now stands at 4.92%, though it will be even lower if you’re getting financing through the car company’s own financing firm rather than an independent bank.

The one loan product to get more expensive last month was the five-year adjustable rate mortgage, which now charges an average interest rate of 3.88%, compared to 3.77% the month before. That indicates a significant uptick in popularity for the five-year ARM since interest rates bottomed out at 3.42% in October last year.

Regionally, the rate climate deteriorated considerably in the Central states this month, with the Credit Power Index spiking 31 basis points for the month. By contrast the South, where the index jumped from 22.61 to 23.09 between December and January, settled back to 22.76 in February.

As a general rule, it’s important not to read too much into these regional swings on a monthly basis.

“After reviewing the history of changes over the past six months, we see that some month-to-month fluctuation of this size is normal,” says Quinn. “It’s too early to tell if these changes are the beginnings of a meaningful trend.”

About RateWatch

One of the nation's largest providers of accurate, up-to-date rate information, this web site,, is relied upon by countless banks and credit unions, providing key data so they can set competitive rates.

About MainStreet

MainStreet provides personal finance tips and advice to help consumers grow their wealth and enhance their lives. By combining lifestyle news, commentary and financial resources, MainStreet is an engaging and fun site "where life and money intersect."

About TheStreet, Inc. is a leading digital financial media company that distributes its content through online, social media, tablet and mobile channels. The Company's network of brands include: TheStreet, RealMoney Silver, Stockpickr, Action Alerts PLUS, Options Profits, ETF Profits, MainStreet and Rate-Watch. For more information on TheStreet’s business, visit For financial and business news, actionable trading ideas, stock quotes and more, visit via your web browser, follow TheStreet on Facebook and Twitter, visit from your mobile device and access TheStreet through all major tablet platforms.

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