Consumer Loan Defaults Accelerate

>90-day credit card delinquency rates jump to the highest level since the first quarter of 2012.

November 19, 2024 • Est. Reading Time: 5 minutes

Mobius Intel Brief:

The Federal Reserve Bank of New York showed a rapid deterioration in household and consumer credit quality in 3Q24, including the highest rate of >90-day delinquent credit card balances since the first quarter of 2012.

Key Intel:

  • According to the Federal Reserve, total household debt increased by $147 billion Q/Q and $778 billion Y/Y to a new record of $17.94 trillion in 3Q24.

  • Flows into serious delinquency jumped as high as 7.7% for consumer credit card loans, raising the total share of credit card balances that are >90 days delinquent to 11.13%.

  • Borrowers’ diminished capacity to service debt is reflected in lenders’ loan application rejections and forced account closures — lenders are rejecting loan applications at the highest rate since at least 2013.

  • The NY Fed’s 3Q24 data indicates underlying weakness in the US’ consumer-led economy, raising odds for 1) material revisions to recent ‘dovish’ labor reports and 2) another 25 bps or greater rate cut in December.

A Closer Look:

Total household debt gained $147 billion to a new record $17.94 trillion in 3Q24, led by mortgage balances (+$75B) and credit card balances (+$24B).

The New York Fed reported aggregate delinquency rates on all consumer debt gained to 3.5% of 3Q24’s total outstanding balance of $17.94 trillion.

  • A closer look at the Fed’s data shows faster flows into serious delinquency for all major loan categories.

As shown above, credit card loans deteriorated into serious delinquency at the fastest pace. As a result, the share of total consumer credit card debt over 90 days delinquent gained to 11.13% — the highest since the first quarter of 2012.

Similarly, transition rates into newly delinquent status gained to decade highs for several non-credit card loan types.

Signals of deteriorating credit conditions are forcing lenders to pull back on loan application approvals. Consumer-reported loan application rejections gained to the highest rate since at least 2013 — led by rejection rates for home loans and credit card limit applications.

Likewise, the New York Fed’s data shows consumer-reported involuntary account closures gained to 8.1% — raising the 2024 YTD average involuntary closure rate to its highest since at least 2013 as lenders hike borrowing standards.

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