More consumer debt is going into delinquency

Data indicates that Americans are increasingly finding themselves overextended financially. According to a New York Fed report published yesterday, the amount of US consumer debt in serious delinquency – aka 90 days or more past due – rose at an annual rate of more than 40% last quarter.

• In particular, serious delinquencies for credit cards (+59%) and auto loans (+20%) rose to their highest levels in over a decade, while delinquencies for student loans and home equity lines of credit moved slightly lower.

Driving the trend… Fed officials say the data indicates more US consumers – especially younger and lower-income households – are struggling with increased borrowing costs that stem from the central bank’s interest rate hikes over the past two years.

• Average credit card interest rates are currently sitting at 24.3% – the highest level on record and up from 16.3% a year ago.
• The typical interest rate on a five-year auto loan has risen from 4.0% to 7.7% since January 2022.
• The average 30-year fixed mortgage rate has nearly doubled over the past two years (3.87% → 7.0%).

📸 Big picture: By many counts, US consumers are facing favorable economic conditions. Unemployment is at its lowest level in half-a-century, consumer spending saw better-than-expected growth in 2023, and employee wages have outpaced inflation for the past 12 months and counting.

But some experts warn that a growing number of Americans – mostly lower- and middle-income renters – are facing significant financial stress due to high inflation, elevated interest rates, and the resumption of federal student-loan payments last fall.

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