Experian-Gallup Survey Shows 50 Percent of Consumers Are Uncomfortable Making a Major Purchase in the Next Three Months

According to the latest Experian-Gallup Personal Credit Index(SM) survey, 50 percent of consumers are uncomfortable making a major purchase such as a home, a car, major appliances or other significant items over the next three months.

In addition, consumer credit perceptions have been negatively impacted by the subprime mortgage market, the sharp increase in housing foreclosures and the recent surge in long-term interest rates.

Mortgage Market Attitudes

"Our survey showed that the highly publicized subprime mortgage market concern has resulted in some interesting opinions consumers have regarding how they view subprime mortgages and what should be done for those who have such loans should they face foreclosure," said Ty Taylor, president of Experian Consumer Direct(SM).

Additional noteworthy results on consumer attitudes toward the mortgage market include:

• 58 percent believe the problems in the subprime mortgage market will affect the overall mortgage market, while 24 percent feel the problems will be contained
• 61 percent of consumers who are very familiar with subprime mortgage loans believe the problems in the subprime mortgage market will spill over into the overall mortgage market
• 55 percent believe the federal government should pass new legislation helping subprime borrowers keep their homes and avoid foreclosure

Overall, about 52 percent of consumers surveyed feel the average price of homes in their area will increase over the next year, while 29 percent believe prices will remain about the same. Eighteen percent of consumers expect that prices in their area will decrease.

Among homeowners, 50 percent believe that average prices will increase, while 32 percent feel they will stay about the same.

Consumer Credit Perceptions

In January and February of this year, the Experian-Gallup Personal Credit Index reached a new high at 105. Since then, consumer credit perception decreased to 87, before rebounding to 95 in July.

Additional survey results on consumer credit perceptions include:

• 89 percent of consumers do not plan to apply for credit in the next three months
• 30 percent of households with annual incomes of less than $40,000 are uncomfortable with their debt burden, while only 16 percent of those with annual incomes of $75,000 or more are uncomfortable
• 17 percent of consumers know someone who has been turned down for credit during the past three months

"One of the key benefits of the Personal Credit Index is its ability to provide insight on consumer perception of the credit markets," said Dennis Jacobe, chief economist of The Gallup Organization. "Consumers are already decreasing their credit use. If regulators and the banks they regulate also decrease their credit use — and longer-term interest rates go higher — consumer credit purchases and the support they provide for the overall economy are likely to decline significantly in the months ahead."