The Latest Personal Finance News for May 2023

Inflation Rate Hits Its Lowest Level in Nearly Two Years

In April, the Bureau of Labor Statistics (BLS) reported an increase in prices of just 0.1% for all items in the consumer price index (CPI) from February to March. That’s a decrease from 0.4% in the agency’s March report

Year over year, prices were up 5% from March 2022, the smallest year-over-year increase since May 2021. That said, the core CPI, which excludes volatile food and energy prices, was up 0.4% in March and 5.6% year over year.

Why It Matters

As the annual inflation rate continues to come down, there will be less pressure on the economy and household budgets. However, the rate remains far above the Federal Reserve’s target of 2%, so it may still take several months for consumers to be out of the woods.

What You Can Do

• Check the Bureau of Labor Statistics CPI page on May 10 for April inflation numbers.
• Read up on how inflation works.
• Research ways to fight inflation and save money.
• Understand how inflation impacts your credit card debt.

Mortgage Rates Are Trending Lower

After a brief spike in March, mortgage rates are on their way back down. According to Freddie Mac, the average fixed interest rate on a 30-year mortgage was 6.27% as of April 13, down from a 20-year high of 7.08% in November 2022.

Why It Matters

While the federal funds rate remains high, cooling inflation could help continue to drive down mortgage rates. However, a pickup in demand in the housing market could temper the downward trend.

What You Can Do

• Stay up to date on the latest average mortgage rates.
• Read more about housing forecasts for 2023.
• Understand how rising interest rates increase mortgage costs.
• Learn how to get a lower mortgage rate.

Housing Market Heating Back Up

Pending home sales grew for a third straight month in February, according to the National Association of Realtors (NAR) Pending Home Sales Index, albeit by just 0.8%. Year over year, contracts are down by 21.1%.

That said, NAR expects the housing market to continue to heat up throughout 2023, with new home sales generating positive year-over-year growth by the third quarter of the year and existing home sales reaching positive year-over-year growth by the fourth quarter.

Why It Matters

If mortgage rates and median sales prices continue to decline throughout 2023, which the NAR expects, homebuyer demand is expected to go up. If you’re thinking of selling your home, this may mean it won’t be on the market for as long. If you’re a prospective homebuyer, though, it may mean more competition.

What You Can Do

• Learn about the homebuying process.
• Get your credit ready for a mortgage loan.
• Read up on the best time to buy a house.
• Get tips on how to sell your home faster.

Recession Fears Remain, but It’s Complicated

There are many leading indicators that signal a recession may be on the horizon. According to The Conference Board Leading Economic Index, which tracks 10 areas of the economy, the U.S. was expected to enter a recession at the end of 2022 or the beginning of 2023. But certain leading indicators aren’t showing signs of a weakening economy.

For example, the economy added 236,000 jobs in March, with an unemployment rate of 3.5%, which is slightly higher than a 50-year low. U.S. gross domestic product (GDP) was up 2.6% in the fourth quarter of 2022, well within the ideal GDP growth rate of 2% to 3% for developed countries. And as previously mentioned, the housing market is showing signs of a comeback.

Why It Matters

A recession may still be on the horizon, but the situation isn’t as clear-cut as it’s been in the past. While consumers should continue to take steps to prepare for a recession, a soft landing, in which the Federal Reserve is able to bring down inflation without throwing the economy into recession, is still possible.

What You Can Do

• Read about what occurs during a recession.
• Learn how to prepare your finances for a recession.
• Consider how to manage your investments during a recession.
• Pad or start building your emergency fund.

Credit Bureaus Remove Medical Debt Under $500 From Credit Reports

The three major credit reporting agencies, Experian, TransUnion and Equifax, have removed all medical collection debt with an initial reported balance under $500 from consumer credit reports. The credit bureaus initially announced the initiative in March 2022. Another part of the initiative, which went into effect last summer, gives consumers a one-year grace period to pay down medical collection debt before it appears on credit reports.

Why It Matters

Nearly 70% of medical collection debt tradelines have been removed from consumer credit files, which can potentially increase the credit scores of those who were previously affected by certain medical debts.

What You Can Do

• Check your credit score to see if it’s improved if the new changes affect you.
• Learn about what happens when a medical bill goes to collections.
• Understand how medical debt can still impact your credit score.
• Read about how to pay medical debt and avoid damaging your credit.

Good Credit Can Contribute to a Healthy Financial Plan

While there are aspects of your financial situation that are outside of your control, building and maintaining a good credit score can help you weather challenges and save money in the long run.

With Experian’s free credit monitoring service, you’ll get access to your FICO Score and your Experian credit report. With this information in hand, you can gauge your credit health and target areas of your credit profile that you can improve over time. And with real-time alerts whenever your report is updated, you can spot potential issues and fraud and address them quickly.