VAN NUYS, Calif., May 17, 2024 /PRNewswire/ — As the cost of living increases throughout the country and the Bureau of Labor Statistics reports inflation is still elevated at over 3%, consumer spending has shown signs of softening but has ultimately remained stable. If the Federal Reserve is forced to keep interest rates higher for longer than anticipated, consumer lending will continue to face headwinds as well.
One of the areas of consumer lending that has already seen a significant decline is loan refinancing. The primary benefit of refinancing is the ability to reduce the interest rate of an existing loan. As a result of the current high interest rate environment, potential refinance borrowers have encountered fewer opportunities to secure lower rates. This is for example evidenced by a notable decrease in auto refinances, which – according to TransUnion’s 2023 Auto Consumer Industry Insights Report – have decreased by about 50% since the Federal Reserve started raising interest rates.
For auto title loans, LoanMart is reporting that refinancing for title loans serviced by the company started decreasing significantly already in 2020. Specifically, the share of loan payoffs made with proceeds from another loan decreased by 58% from 2019 to 2020, and has decreased even more since then. By the same token, the share of newly originated loans serviced by LoanMart that included a 3rd party payoff decreased by 53% from 2019 to 2020, and has not recovered since.
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SOURCE LoanMart