Stretched consumer: Delinquency rates for credit cards and auto loans tick up
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Consumers continue to look more financially stressed, according to new data from the New York Fed.
Why it matters: More Americans are falling behind on loan payments. Household balance sheets once looked rock-solid. That is no longer the case as the economy slows and high interest rates weigh on consumers.
By the numbers: Roughly 8% of auto loan balances were newly delinquent in the second quarter, with payments at least 30 days late. That is roughly flat relative to the start of 2024.
- The story looks similar for credit card balances, which edged up by 0.1 percentage point from the second quarter. Both are the highest since the financial crisis.
Yes, but: The deterioration in household balance sheets is clearer when comparing these rates to the same period a year ago.
- Delinquency rates for credit cards have jumped 1.8 percentage points since the second quarter of last year. For auto loans, it's 0.7 percentage point.
- The share of credit card balances transitioning into "serious" delinquency status — with payments 90 or more days late — was about 7.2% last quarter. This time last year, it was about 5.1%.
What they're saying: Some officials at the Federal Reserve have called out rising delinquency rates as a sign that consumers are pinched.
The intrigue: Those aged 30-39 have transitioned into delinquency at quicker rates than other cohorts.
- Researchers at the New York Fed offer a few reasons why this might be the case: They overextended themselves during the pandemic and they're more likely to be renters, so they're more exposed to rent price increases.
What to watch: Other loan types show little trouble for consumers: Mortgage delinquencies remain lower than in pre-pandemic times.
- It's a bit foggier for student loans: Late payments still aren't being reported to credit agencies.
