In the fourth quarter of last year, the delinquency rate for various types of loans in the United States, ranging from mortgages to credit cards, rose to 4.8% of total outstanding household debt. This marks the highest level since 2017, primarily driven by an increase in defaults among low-income groups and younger borrowers.
The Quarterly Report on Household Debt and Credit released by the New York Fed on Tuesday indicated that although the overall proportion of loans in some stage of delinquency is close to the pre-pandemic average, the rising delinquency rate among the lowest-income groups further confirms the increasingly divergent trend in the U.S. economy.
New York Fed researchers stated that the increase in the delinquency rate is mainly due to a rise in mortgage payment delinquencies, which is particularly evident in low-income areas. The researchers also noted that a sharp increase in student loan delinquencies has contributed to the overall rise in defaults.
"While household debt levels have increased modestly, mortgage delinquency rates continue to rise," said Wilbert van der Klaauw, an economic research advisor at the New York Fed, in a press release accompanying the data. "Mortgage delinquency rates are approaching historical norms, but the deterioration is concentrated in low-income areas and regions experiencing declining home prices."
The report shows that total U.S. household debt increased by 1% from the previous quarter to $18.8 trillion. The proportion of credit card loans delinquent by at least 90 days rose to 12.7%, the highest level since the first quarter of 2011. The share of auto loans in serious delinquency increased to 5.2%, slightly below the record set in 2010.
Researchers also indicated that the decline in the debt repayment capacity of low-income and younger borrowers aligns with rising unemployment rates among certain demographic groups. In December, the unemployment rate for individuals aged 16 to 24 was 10.4%, nearing the highest level since the peak of the pandemic in 2021.
Approximately 16.3% of student loans entered delinquency in the fourth quarter, representing the largest increase since data recording began in 2004.