Trump's credit card rate cap plan may restrict mortgage credit

"According to him, profit margins for credit card companies now exceed 50%, while interest rates charged to consumers often range from 28%, 30%, 31%, 32%. I'm asking Congress to cap credit card interest rates at 10% for one year, and this will help millions of Americans save for a home. They have no idea they're paying 28%. They go out there a little late in their payment, and they end up losing their house."

"In theory, it sounds great because running those rates down to 10% would naturally lower the payments that are due on those credit cards, said Todd Bitter, national sales director at NEXA Lending. My concern is that this is going to cause the credit card companies to tighten credit severely. That tightening could take the form of reduced credit limits, which would drive up borrowers' credit utilization ratios and potentially drag down credit scores hurting their mortgage eligibility in the process."

Rising credit card debt is cited as a major obstacle to saving for home down payments, with reported credit-card profit margins exceeding 50% and consumer rates commonly above 28%. The proposal requests a temporary 10% cap on credit-card interest for one year to free monthly cash for savings or faster balance payoff. Lenders warn that mandated rate caps could prompt credit-card issuers to tighten credit, reduce limits, or deny new cards, raising utilization ratios and lowering credit scores. Those credit effects could make mortgage eligibility harder despite lower interest rates on existing balances. Historical pullbacks occurred during the 2008–09 crisis and the COVID-19 pandemic.

Read at www.housingwire.com