Increase in credit card delinquencies signal 'financial stress,' New York Fed says

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Signs of financial stress are showing up, especially among younger and lower-income households, as debt climbed 1.2% in Q4 2023, the Federal Reserve Bank of New York said on Tuesday in its quarterly Household Debt and Credit Report.

“Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels,” said Wilbert van der Klaauw, economic research advisor at the New York Fed.

Total debt increased by $212B to $17.5T in the quarter. Mortgage balances rose by $112B from Q3 to $12.3T at the end of Q4. Credit card balances rose by $50B to $1.13T, and auto loan balances climbed by $12B to $1.61T.

Some 1.42% of total debt flowed into serious delinquency (delinquent by 90 days or more), compared with 1.03% in Q4 2022. Delinquency transition rates increased for all debt types, except for student loans.

Credit card debt flowing into serious delinquency rose to 6.36% in Q4 2023 from 4.01% a year earlier, and auto loan debt transitioning to serious delinquency increased to 2.66% from 2.22% in Q4 2022, the New York Fed said.

Credit quality of originated loans held steady, with 4% of mortgage and 15% of auto loans originated to borrowers with credi scores of under 620, essentially flat with Q3 2023.

Harry Byrne

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