Consumer spending dropped 0.9% in January, the biggest fall in two years. Credit card debt and interest rates are rising, which could push mortgage rates higher and keep inflation stubborn.
A slowdown in consumer spending could help mortgage rates. A retail sales report, which this is a report that shows the amount of consumer spending in retail stores and online dropped from December to January by 0.9%. Now, the expectation was just a 0.1% drop. So this was a monumental shift in consumer spending. This is actually the biggest drop in two years. You could definitely see a change in the direction of consumer spending habits. But now looking more into it, why is that? Well, I think a big part is consumer credit card debt is at all time highs. We know right after Covid super credit card debt dipped down a little bit bit because there were stimulus checks. That stimulus money is long dried up and now we are 41% higher than where we were pre Covid. We're at 1.2 trillion in total credit card debt across the country, all time high. And credit card interest rates are at all time highs in the mid-20s. So consumers are pulling back spending less. Now this is nothing to take lightly, but the only good thing that could come from this from the mortgage perspective is if consumers do keep pulling back on their spending, that pulls back on inflation, which drops mortgage rates.
