There are signs of increasing financial stress as the latest data from the Federal Reserve Bank of New York reveals a rise in delinquencies for credit card and auto loans. The Quarterly Report on Household Debt and Credit shows that overall household debt increased by $212 billion, reaching $17.5 trillion in Q4 2023. However, the report also points out an increase in delinquency rates across different types of debt.
Specifically, the report highlights a surge in credit card balances transitioning into delinquency (90+ days late) with a rate of 6.36% in Q4, up from 4.01% compared to the previous year. Similarly, for auto loans, the delinquency rate jumped to 2.66% from 2.22%. This rise is particularly noticeable among individuals and those with lower incomes, indicating heightened financial pressure.
At Reverse Consolidation we have seen both credit card and auto loan delinquencies exceed pandemic levels as they transition into serious delinquency. This aligns with Federal Reserve data that shows an increase in transitions into delinquency for these types of loans. Additionally, according to the Fed report, aggregate delinquency rates reached 3.1% of total debt in Q4.
While mortgage delinquency rates remain historically low overall, there was an increase to 0.82% in Q4 2023 compared to 0.57% in Q4 2022. However, the growing number of defaults in mortgage debt indicates a significant level of financial strain, primarily affecting millennials and individuals with lower incomes. The recent data from the Federal Reserve Bank of New York underscores the importance of monitoring their escalating credit difficulties to prevent any potential negative consequences from spreading.
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