Consumers Feel Better about Credit, But Voice Concern on Home Loans

Experian here and the Gallup Organization said that in May, customer sentiment about their credit had slightly improved according to the Experian-Gallup Personal Credit Index. On the other hand, the survey shows customers appear to be more aware of changes and risks associated with the mortgage marketplace.

If the benchmark PCI published two months before was at 100, Experian said, it dropped to 82 the prior month, sliding back upwards to 86 in May.

The slight PCI change "suggests that customers' feelings are stabilizing and perhaps they are experiencing a wait-and-see outlook with regard to changes in the economy," said Ed Ojdana, group president of Experian Interactive. "With short-term interest rates and housing prices continuing to rise, it's understandable if customers are being cautious."

A recent Experian-Gallup survey found that most customers, about 70%, expect housing prices and mortgage rates to rise in the next year, while 24% expect it to remain steady. However, 75% of those who expect changes believe these changes will be modest, with only 25% expecting prices to rise 10% or more.

Also, most customers appear to recognize long-term risks associated with adjustable-rate mortgages and prefer a fixed-rate mortgage loan.

"It is gratifying to see that most customers are aware that interest rates are on the rise and that mortgage rates will be affected," said chief economist at Gallup, Dennis Jacobe, so customers should now consider alternatives to ARMs.

Also, "there has been a lot of talk about a housing bubble," he said, but the survey shows "few customers" are aware of it, which is troubling because some customers with mortgages "could end up upside down, meaning they will owe more on their mortgage than their house is worth." Up to 65% of the customers surveyed had not heard of the possibility of a housing bubble, and 12% said they had heard "only a little."

SNAPSHOT: Experian/Gallup Personal Credit Index

May 86

April 82

March 100

Source: Experian/Gallup

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