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Americans Face Difficulties Securing Loans Amid Federal Reserve’s Interest Rate Hikes

Nearly two years after the Federal Reserve began aggressively raising interest rates, Americans are finding it harder to get approved for loans and other financial products. A Bankrate survey revealed that 50% of applicants have been denied since March 2022. Credit card applications faced the most rejections, with 14% of Americans denied a new credit card, 6% a balance transfer card, and 11% a credit limit increase on their existing card. Other denials included personal loans (10%), car loans or leases (9%), insurance (8%), and mortgage loans (5%). Banks are tightening lending standards in response to higher interest rates.

The Fed has raised interest rates 11 times in the past two years, from near zero to above 5%, to combat inflation and cool the economy. This has led to higher borrowing costs for consumers and businesses, slowing economic activity. As a result, banks have become more selective in approving loans, focusing on factors like income, debt, and payment history. The share of Americans denied a loan is higher for those with lower credit scores, with 73% of those with "poor" credit scores being denied compared to 55% with "good" credit. Experts advise focusing on improving credit scores and reducing debt-to-income ratios to mitigate the impact of higher interest rates. Read More.

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What’s Behind the Continued High Cost of Groceries?

Inflation has been decreasing faster than anticipated, yet high food prices continue to strain American budgets. Grocery prices have risen by more than 21% since early 2021, surpassing the overall inflation rate of 18% during the same period.

Despite a recent slowdown in price increases, the cost of many grocery staples continues to rise, with experts predicting little immediate relief for consumers. High food prices are a significant concern, especially for low-income Americans who spend about 30% of their income on food. The reasons for rising food prices include supply chain issues, a reduced cattle inventory, an Avian flu outbreak affecting poultry supply, a global grain shortage due to the conflict in Ukraine, and increased wages for food service workers.

Federal Reserve Chair Jerome Powell indicated that high prices might persist unless there is a severe recession. Inflation has dropped from a peak of 9.1% in June 2022 but remains above the Federal Reserve's 2% target. As a result, the typical U.S. household is paying significantly more each month for the same goods and services compared to previous years. Read Now.