Personal Finance

Key Takeaways

  • Mortgage rates in 2023 reached their highest levels in 23 years as lofty interest rates pushed homeownership out of reach for more Americans.
  • Student loan repayments resumed in October as President Joe Biden unveiled a new repayment program after forgiveness was struck down by the Supreme Court.
  • The IRS again delayed a tax rule for online marketplace sales, ticket sales, and transactions requiring a 1099-K form.
  • Inflation began to slow in the second half of the year, but gas prices kept readings high, and consumers remained uncertain about where prices were heading.
  • A spate of banking failures in the spring had consumers worrying whether the financial system could collapse and if their bank deposits were safe.

From bank failures to high mortgage rates to student loan repayments, there were plenty of stories in 2023 that affected people’s wallets. After the Federal Reserve raised interest rates to their highest levels in 22 years, inflation began to slow some in 2023, but consumers said that the run-up in prices remained a top concern.

One thing consumers had on their mind was mortgage rates, which reached 23-year highs, while others had a resumption of student loan repayments to worry about. However, the Internal Revenue Service (IRS) did give some taxpayers a break when it delayed a new tax on online sales that will affect online vendors, ticket sellers, and people who perform other online transactions.

Here are some of the personal finance stories that had the biggest impact on consumers in 2023.

Mortgage Rates Hit 23-Year High

Anyone in the housing market in 2023 knows the impact that rising mortgage rates have had on the real estate industry. The effect of rapidly increasing mortgage rates on the market was widespread, from buyers being priced out of the market to potential sellers holding onto properties they purchased with favorable rates, squeezing housing inventory.

Mortgage rates first surged above 8% in late September, the highest levels in 23 years. Rates lingered around that 8% mark for most of October before beginning a descent in mid-November. As the Federal Reserve continued its campaign to raise interest rates in 2023—enacting four hikes over the year—mortgage rates followed. Starting at about 6.5% to open the year, the average mortgage rate has risen almost 1.5 percentage points since then. It has more than doubled since the start of 2022.

Higher mortgage rates have helped sink the volume of mortgage applications to their lowest point in 28 years as fewer homebuyers choose to take on the high costs of borrowing. Potential homebuyers also need a higher income, with estimates that it now takes a salary of $105,324 to afford a typical American home.

Student Loan Payments Resume

After a three-year pause that started during the pandemic, student loan payments resumed in October after a ruling from the U.S. Supreme Court struck down the student loan forgiveness program proposed by President Joe Biden. The decision resumed payments for about 22 million people, who owned an average of $275 per month on their federal student loans. 

However, the Biden administration also unveiled a new income-driven repayment program to replace the one ended by the high court. Called the Saving on a Valuable Education (SAVE) Plan, the program sets monthly payments at 5% to 10% of a borrower’s discretionary income. It also offers forgiveness for loan balances after 20 or 25 years.

IRS Pushes Back Strict New Online Sellers Rule

The IRS in November once again delayed a new set of rules that would affect people who sell items on eBay or Etsy, resell concert tickets, or use online payment systems like Venmo and Cash App.

The IRS ruling kept in place for the 2023 tax year the current thresholds for those sales, which require that sellers file a 1099-K form on more than $20,000 in revenue and 200 transactions. Until that decision, sellers had been facing a potential $600 threshold for those sales, which include ticket-reselling platforms like Ticketmaster and StubHub. It’s the second time the IRS has delayed the decision on implementing the tax rules, which came as part of the 2021 American Rescue Plan Act.

However, online sellers can expect some stricter enforcement of the law in 2024, as the IRS announced that it will enforce a $5,000 threshold for online sales in that tax year.

Inflation Begins To Cool, but Consumers Still Worried About Prices

When consumers woke up on New Year’s Day in 2023, they may have felt a hangover from 2022’s soaring inflation, with the January 2023 Consumer Price Index (CPI) showing that prices were still 6.4% higher than the year before. The persistently higher prices motivated the Federal Reserve to keep raising interest rates to combat inflation, with the central bank hiking rates to 5.25% to 5.5% in July.

The interest rate hikes appear to be taking hold, with the CPI showing annual inflation unexpectedly falling to 3.2% in October, lower than the 3.7% inflation rate that economists were expecting. Other inflation measures also moved lower in 2023, as the Personal Consumption Expenditure (PCE) index fell as low as 3% in June, although that index rose as gas prices spiked in the summer. But since then, gas prices have fallen for 10 consecutive weeks, according to gas price website GasBuddy. 

Whether consumers are feeling the slower pace of inflation is an open question. The Michigan Consumer Sentiment Index dropped for four consecutive months, with households reporting that they expected inflation to worsen over the next 12 months and hit 4.4%. Another measure of consumer optimism, the Consumer Confidence Index, showed that consumers expect inflation of 5.7% over the next 12 months, although those expectations are lower than in previous reports.

Banking-Sector Failures Raise Worries Over Account Safety

With echoes of the 2008 financial crisis, federal regulators worked over the weekend in March to secure a deal to protect depositors of Silicon Valley Bank. The collapse of the California-based financial institution kicked off a hectic spring period when several banks failed, stoking consumer fears over whether their deposits were safe.

Silicon Valley Bank marked just the first failure, as Signature Bank was shut down a few days later after another spate of accountholder withdrawals deflated the institution. Soon thereafter, Swiss banking giant Credit Suisse went under, followed by the failure of First Republic Bank.

For several weeks, market watchers looked for signs of further turmoil in the banking sector. That included banks borrowing more than $300 billion in temporary federal lending to make sure they had enough liquidity to meet consumer withdrawals—some of which came through the Bank Term Funding Program (BTFP) created by the Federal Reserve to address issues arising from the Silicon Valley Bank failure. 

The crisis raised questions about the health of the deposit system. While the Federal Deposit Insurance Corp. (FDIC) insures accounts up to $250,000, some individuals and businesses at the institutions had larger accounts, putting them in jeopardy of losing deposits.

Clarification: This article was updated on Dec. 28 to clarify that mortgage rates first hit the 8% mark in September and remained elevated through October.