Using an article republished with permission from The Street, Matt Brownell writes for NuWire Investor to explain why the Credit Power Index is at its lowest level in three years as reported by credit and interest analyst, RateWatch.
The index now is not being driven by any appreciation in CD interest earnings but rather by the lowest interest rates since 2008. As CDI measures the difference between the interest earned on certificates of deposit and the interest charged on specific loan products, a big gap means it’s bad for borrowers and bank investment purchasers.
The seed article from The Street presents the scenario that explains how, during the recession, consumers resist getting into debt, pay with debit cards in place of credit cards, and didn’t take out home and auto loans.
However, with lower interest rates on loans, consumers are beginning to take out loans again and home loans are on the rise. But while lower loan rates are good for borrowers, it is not so for savers with low interest on their savings.
Where the four US regions are concerned, the once-under performing Western region seems to be easing itself out of the credit crunch ahead of the others.