Fuel for the American Economic Engine Loans & Mortgages Profiler 2016 Brought to you by THE MEDIACENTER © 2016 THE MEDIACENTER. All rights reserved.

The Debt Balance Burden Total household indebtedness increased $212 billion from Q2 2015 to a total of $12.06 trillion, as of the end of Q3 2015. Despite this increase, total household indebtedness was still 5% less than its peak (since 2004) of $12.68 trillion during Q3 2008. Housing debt was 72.6% of the Q3 2015 total, or $8.75 trillion, with the remaining $3.31 trillion as non-housing debt. According to the US Federal Reserve, non- housing debt increased to $3.526 trillion by November 2015. Total outstanding revolving consumer credit was $929.1 billion and non- revolving consumer credit, $2.597 trillion.

Mortgage Companies: Sharpen Your Pencils! In line with other housing market sources, Kiplinger predicts a 16% increase in single-family housing starts and sales for 2016, or an average of 1.25 million units. Existing home sales are expected to increase 4%. As employment among Millennials increases significantly, CoreLogic is predicting the formation of 1.25 million new households during 2016, which will have a positive impact on the housing market. With the potential for the US Federal Reserve’s interest rate to increase to 1.0% by the end of 2016, 30-year fixed-rate mortgages are forecast to increase from just less than 4% at the first of the year to the 4.5–5.0% range by the end of 2016.

The Auto Market Still in Fifth Gear 2016 is forecast to be another good year for automakers, dealerships and auto loan providers. After totaling 17.47 million light- vehicles sold during 2015, the National Automobile Dealers Association is predicting 17.71 million units for 2016. A growing labor market, moderate wage growth and a continuation of low gasoline prices will all contribute to a new record year; however, the 2016 unit increase will be just 2.3%, compared to 5.7% for 2015. The forecast for auto loan interest rates during 2016 is 5% for the average 5-year loan and 6% for the average 4-year loan by the end of the year. During January, these rates were 4.35% and 5.15%, respectively.

Payday Loans Told to Toe the Line Total revenues for the payday lending industry are approximately $45 billion; however, there are fewer brick-and-mortar locations, as approximately $4 billion of those revenues are now generated online. During 2015, the US Consumer Finance Protection Bureau (CFPB) proposed regulations to make payday loans, vehicle title loans and similar lending products fairer by applying a fixed interest rate and offering affordable, manageable payments. According to consumer surveys from The Pew Charitable Trusts, 75% of consumers support greater regulation of payday loans and 70% to 78% are in favor of the CFPB’s primary regulatory guidelines.

Everyone’s Shopping Companion Average credit card debt for US households was $10,704, as of November 2015, which is 3.7% more than 2014’s average of $10,318. Since 2010, 2013 had the lowest average credit card debt per household, at $9,981. Unfortunately, it is the households with negative or zero net worth that had the highest average, at $10,307. It was lowest ($3,946) among households with a net worth of $1 to $4,999. Those with a net worth of $500,000+ had $8,139 in average credit card debt. Men had a much larger average credit card debt than women, at $7,407 and $5,245, respectively. European Americans had the highest average, or $7,942; followed by Asian Americans, $7,660; Latino Americans, $6,469; and African Americans, $6,172.

Advertising Strategies With credit unions securing a larger share of the loan market, encourage them to use TV to continue to build their brands and strength their position as consumers’ best financial services alternative, compared to banks and loan companies. Suggest that banks use TV and social media to promote an incentive to attract young, first-time homebuyers for mortgages. Upon securing a mortgage with the bank, customers receive a free one-hour consultation with a financial advisor. Those payday loan companies that adjust their business practices in accordance with the FCPB guidelines should make their compliance the prime message of their TV campaigns to differentiate themselves from companies that continue to operate in the old manner.

Social Media Strategies Word of mouth still has the strongest influence among consumers; so loan and mortgage companies should regularly post video testimonials with customers telling their stories: their financial need, how well the company served their need and the impact on their lives. Loan and mortgage companies can use a blog, podcasts and videos to present information and aids to help consumers improve how they manage their finances, especially family budgeting and saving for a home down payment, college tuition and retirement. Credit unions can use social media to target specifically young adults who are more likely to seek alternative financial services. This audience will be attracted to videos that feature young adult hosts and explain the differences between banks and credit unions.

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