(Bloomberg) -- The share of outstanding US consumer debt that’s in delinquency rose in the fourth quarter to the highest in almost five years, according to a Federal Reserve Bank of New York report.
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Some 3.6% of debt was delinquent in the final three months of 2024, the most since the second quarter of 2020, the New York Fed said Thursday in its Quarterly Report on Household Debt and Credit. Total household debt — which is primarily composed of mortgages, student loans, auto loans and credit-card balances — rose 0.5% to a record $18 trillion.
The report suggests Americans are increasingly struggling financially as they face a third year of elevated interest rates imposed by the US central bank in its campaign to bring inflation down. New York Fed researchers pointed to auto loans in particular as a source of strain in an article accompanying the report.
“Higher car prices combined with higher interest rates have driven monthly payments upward and have put pressure on consumers across the income and credit score spectrum,” the researchers, led by Andrew Haughwout, wrote. “Used car prices have since declined from the peak, potentially leaving some borrowers underwater on those vehicles and creating potential repayment challenges.”
Transitions into serious delinquency — defined as 90 or more days past due — edged up for auto loans, credit cards, and home equity line of credit balances but remained stable for mortgages, according to the report. The share of auto loans that transitioned into serious delinquency rose to 3%, the highest since 2010, while the share of credit-card balances transitioning into serious delinquency, at 7.2%, matched the highest since 2011.
Credit-card balances registered the fastest increase in the fourth quarter, rising 3.9%. Auto loan debt rose 0.7%, student loan debt rose 0.6% and mortgage debt eked out a 0.1% advance.
Shortly after Covid-19 was declared a national emergency, a federal program allowed borrowers to temporarily pause or reduce their monthly payments on student loans, which meant missed payments were not reported to credit bureaus between the second quarter of 2020 and the third quarter of 2024.
Millions of Americans may now be behind on those payments, but because it takes at least 90 days for them to be reported delinquent or in default, the New York Fed report said missed payments “will likely begin appearing on reports” in the first quarter of 2025.