April 1, 2006 — After last month's rise, consumers became more negative about their credit situation this past month, as the Experian-Gallup Personal Credit Index dropped nine points to 84. The survey results indicate that consumers have lost momentum regarding the future — especially with the nation's looming housing bubble. Future concerns about extending debt — as well as making their monthly payments — accounted for most of the decline.

As little as five years ago, the term "housing bubble" probably didn't exist. Today, not only has it gained incredible momentum, it's become a household word. Among all consumers, 53% recognized the term "housing bubble" without an explanation, compared to just 35% last year.

When asked about the likelihood of a national housing bubble and collapse of prices within the next year:

• 71% of consumers expect a housing bubble/price collapse within 12 months
• 24% of consumers say a housing bubble/price collapse is not likely

Rising interest rates expected
Continued anticipation of rising mortgage interest rates may have helped drive consumers' housing bubble fears. Among all consumers, 72% expect rates to rise (down 3% from last year) and only 4% expect rates to fall (up 1% from last year). Among those consumers who expect mortgage rates to rise this year, most feel the increase will not be too significant.

• 52% expect "an increase of no more than 1.0 point"
• 25% expect "an increase of at least 2.0 points"

Consumers more optimistic, closer to home
While the results of this month's survey may seem alarming on a national level, consumers are much more optimistic about conditions where they live. Only 32% expect a housing bubble to occur "in their area" within the next year.

When asked about housing prices in their own area within the next year, consumers revealed some interesting results.

• 60% expect housing prices in their area "to rise"
• 27% expect them to "stay the same"
• 11% expect a "decline" in home prices

Among those who expect housing prices in their area to rise, 41% expect "at least a 5% increase" and 20% expect "at least a 10% increase."

A Growing Number of Americans Turning to Home Equity to Finance Current Lifestyle
Lastly, the number of homeowners this year remains at 73%, unchanged from last year. Additionally, 63% of homeowners carry a mortgage, down 5% from last year.

Overall home equity loan utilization (home equity loans and home equity line of credit) decreased slightly from last year (44% vs. 45%). Home equity loans accounted for 20% this year, down from 23% last year. Home equity line of credit loans remained unchanged at 22%.

When it comes to variable interest rates versus fixed rates on either type of home equity loan, 18% of consumers chose a variable rate in 2006, up 2% from last year's 16%.

Home Sweet Home Equity
Increasing home prices and the ability of consumers to take equity out of their homes has been a key driver of consumer spending. Here's how borrowers used the money to help finance their current lifestyles

• 43% to finance home improvements
• 10% for debt consolidation
• 4% for emergency
• 3% for education expenses
• 2% for medical expenses
• 30% for some other reason

Looking ahead six months, consumers' financial plans include:

• 6% plan to borrow money to purchase a new home
• 2% plan to refinance their current home
• 2% plan to borrow money using a home equity or line of credit

About the Experian-Gallup Personal Credit Index The Experian-Gallup Personal Credit Index is a monthly survey among a nationally representative sample of 1,000+ respondents, focusing on consumers' ever-changing attitudes and perceptions relating to their current credit situation and future expectations. Specific areas of inquiry include debt load, credit score, borrowing and repayment ability. The survey's margin of error is +/- 3%.