New data from the Federal Reserve Bank of New York shows that consumer debt continues to rise, and the strain is being reflected in an increase in car loan and credit card delinquencies.
While many U.S. consumers’ finances are holding up, Tuesday’s data showed that some struggling groups are forming, with lower-income households and younger consumers falling far behind. say the researchers.
Total household debt, which includes mortgages, auto loans, credit cards and student loans, rose to $17.5 trillion in the fourth quarter, according to the New York Fed’s Quarterly Report on Household Debt.
New York Fed researchers note that this is about 1% quarterly growth, on par with the previous quarter, as inflation declines.
But researchers are looking specifically at credit card balances and auto loans, where transitions into delinquency continue to rise above pre-pandemic levels. “This signals growing financial stress, especially among young people and low-income households,” Wilbert van der Klaug, economic research adviser at the New York Fed, said in a statement. Ta.
And while delinquencies are increasing across all demographics, researchers found that credit card delinquencies are particularly prevalent among Millennials (those born between 1980 and 1994) and among the bottom quartile of income earners. This was particularly noticeable among households with a large proportion of their debt and daily necessities. of household funds.
These debts are also straining household budgets as student loan payments resume. Student loan balances were nearly flat this quarter, rising $2 billion to $1.6 trillion, according to figures compiled by the New York Fed.
Consumers took on an additional $50 billion in credit card debt in the fourth quarter, which included the holiday season. Americans currently have $1.13 trillion in credit card balances.
During the fourth quarter, 8.5% of credit card debt was 30 days or more past due, and 6.3% was seriously delinquent, meaning it was at least 90 days past due.
The highest rate of serious delinquencies was last seen in the second quarter of 2011, according to data from the New York Fed.
Percentages are on an annual basis.
car loan
Meanwhile, auto loan balances increased by another $12 billion to $1.6 trillion in the fourth quarter.
For auto loans, 7.6% of debts were 30 days late and 2.6% were 90 days late. The second quarter of 2010 was the last time the percentage of auto loan debt was at least 90 days past due.
Auto loan delinquencies highlight the high cost of cars these days, especially for buyers with poor credit scores.
Car buyers with poor credit and needing financing are facing higher borrowing costs, with interest rates on new car loans for subprime borrowers ranging from 17% to 22% last year, according to Fitch Ratings.
During the fourth quarter, nearly 16% of people who needed money to buy a new car planned to spend at least $1,000 a month, not including the cost of auto insurance.
The average transaction price in December was $48,759, according to Cox Automotive.
As with many aspects of the current economy, when it comes to debt, mixed signals point to strengths and weaknesses. Although delinquencies are increasing, New York Fed statistics show household debt is higher now than it was just before the pandemic began in early 2020.