New York Fed report shows U.S. loan default rate rises to highest level in nearly a decade
In the fourth quarter of last year, the delinquency rate on various types of loans in the United States, including mortgages and credit cards, rose to 4.8% of total outstanding household debt—the highest level since 2017—mainly driven by increased defaults among low-income groups and young borrowers.
The Federal Reserve Bank of New York's Household Debt and Credit Report, released on Tuesday, showed 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 growing polarization of the U.S. economy.
Researchers at the New York Fed stated that the rise in default rates is mainly due to mortgage repayment delinquencies, which are particularly pronounced in low-income areas. They also noted that the surge in student loan delinquencies has contributed to the overall increase in defaults.
"As household debt levels grow moderately, mortgage delinquency rates continue to rise," said Wilbert van der Klaauw, Economic Research Advisor at the New York Fed, in a press release accompanying the data. "Mortgage delinquency rates are near historically normal levels, but the deterioration is mainly concentrated in low-income areas and regions where housing prices are falling."
The report shows that total U.S. household debt increased by 1% from the previous quarter to $18.8 trillion. The share of credit card loans that were at least 90 days delinquent rose to 12.7%, the highest since the first quarter of 2011; the proportion of auto loans entering serious delinquency rose to 5.2%, just below the record set in 2010.
Researchers also noted that the declining debt repayment ability among low-income and young borrowers corresponds with rising unemployment rates in certain populations. In December last year, the unemployment rate among those aged 16 to 24 was 10.4%, close to the highest level since the worst period of the pandemic in 2021.
About 16.3% of student loans entered delinquent status in the fourth quarter, the largest increase since data records began in 2004.
Editor: Ding Wenwu
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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