During our June 2023 Market Pulse webinar, “How Fintechs are Tackling Economic Headwinds and Tighter Credit,” attendees were able to ask questions to our panel of industry experts and economists. Below you will find the answers to the questions we were unable to get to during our webinar. To view the full webinar recording, click here or if you would like to download the deck, here. 

What are some examples for Net other income?

Amy Crews Cutts: Government transfer payments (Social Security, Veteran's benefits, unemployment insurance, medicare, medicaid, etc.), proprietor income, and some other small items and then I netted out taxes in the deck to get total disposable personal income.

A lot of people are betting on rate cuts this year. Are you still predicting rate increases for 2023? If so, how many (1, 2, +3 more)?

Amy Crews Cutts: Guessing what the Fed is thinking is often a fool's errand. However, they have signaled at least one and possibly two increases are likely. Given where I see inflation moderating through May, in the recent month-to-month and quarter-over-quarter changes to something near 2%, I think they will do zero or possibly one more increase.

What is the economic outlook for consumers continuing to tap into home equity in light of the higher rate environment?

David Sojka: With high mortgage rates, many existing homeowners with low mortgage rates are opting to stay put and instead do improvements, tapping equity in their home to accomplish this.

Is the forecast for home equity borrowing going to continue to be elevated or will it taper off based on the elevated rate environment?

David Sojka: Rates are expected to come back down later this year, which makes the variable rates of HELOCs attractive to those that want to tap into the high amount of equity they have.

Amy Crews Cutts: Home maequity lending allows a homeowner to extract cash without giving up either the right to the asset (the sale option) or giving up a sweet low interest rate on their first mortgage (the cash out refinance option). I think we will continue to see strong demand for this product for as long as mortgage rates stay above 4%. People will move regardless if they have a compelling reason. If it's simply that they would live in a renovated or larger home, home equity loans allow them to make the changes at low costs. 

Do you see private labels ever recovering or are we past Private Label Credit Card (PLCC)?

David Sojka: While they will not go away, their peak volume is in the rearview mirror. Private Label cards typically have been popular with near and subprime credit score customers, looking to establish credit. These are higher scoring customers, who had the money for purchases, but liked the payment promotion options and rewards offered. Financing options like buy now, pay later (BNPL) don't provide similar rewards or loyalty benefits, so they do not steal those customers away.

Is the U.S. at risk of deflation?

Amy Crews Cutts: I don't think so. Some prices will deflate, like what has happened recently with gasoline prices. But the cost of raw materials and the lack of sufficient housing will propel enough inflation to keep us on the plus side. Also, demand is still strong and I don't see that changing enough to cause deflation. 

Where do you believe student loan payments will be on the payment hierarchy pyramid?

David Sojka: They are typically the last thing to be paid.

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