A new report from the Bank of America Institute highlights a clear trend: consumers are paying more for essentials like housing, insurance, utilities, and car loans while finding slight relief from lower gas prices. The data also indicates that discretionary spending — on things like travel, dining out, and entertainment — has diminished during the past two years, particularly among lower-income households. However, that decline has stabilized over the last year.
Why it matters: For professionals in debt collection, debt buying, fintech, and consumer finance, these shifts underscore the economic pressures everyday borrowers face. As core living costs rise, repayment ability could weaken. Lower-income households, in particular, have experienced a notable jump in rent and mortgage payments, which climbed about 11% from the 2023 average — higher than the 9% increase for wealthier consumers. This squeeze, compounded by growing insurance and utility expenses, may translate into more delinquent accounts over time.
The big picture:
- Housing spike: Lower-income renters are absorbing rent hikes that have spread into previously cheaper regions.
- Hidden homeowner costs: Insurance fees and property taxes bundled into monthly mortgage payments have jumped, affecting higher earners too.
- Utilities & car payments: Monthly utility bills rose faster than official inflation data suggested, and nearly one-fifth of car-owning households now pay $1,000 or more per month on vehicle loans.
- Adjusting shopping habits: Consumers are shifting grocery budgets toward discount retailers, particularly in lower-income tiers. Meanwhile, the drop in gas prices has helped free up some cash — though not enough to offset all other rising costs.
Between the lines: While solid wage growth and relatively low unemployment (around 4.1%) have given households some breathing room, consumer sentiment is cooling. Two-thirds of those surveyed expect more job losses ahead, which may further dampen spending on non-essentials.
