Unpacking the Latest Trends in Consumer Credit and Delinquency

Since the Market Pulse webinar is so dynamic, we want to ensure you do not miss one observation. Below, we recap consumer credit trends with Maria Urtubey, Equifax Risk Advisor. For macroeconomic updates from Amy Crews Cutts, President and Chief Economist at AC Cutts & Associates, be sure to check out Part 1. Find the discussion from Scott Przybyla, Senior Vice President of Sales and Identity Fraud at Kount, an Equifax company, and Gaurav Mittal of Ethoca, a Mastercard company, in Part 3 (coming soon).  

CONSUMER CREDIT TRENDS with Maria Urtubey, Risk Advisory Practice, Equifax

Mortgage loans issued so far this year have slightly increased compared to last year by 1.1%. Yet, these numbers are still some of the lowest in the past decade. The number of new mortgage accounts has decreased by 3.7% compared to last year. This decline is because homes have become more expensive, with borrowing costs around 7% for a 30-year fixed loan. This cost has made it more difficult for people to qualify for loans, especially in places like California, where the median home price in the San Francisco Bay Area is about $1.2 million. Subprime mortgages have been increasing, but they still make up only 5% of all first mortgages.¹

There have been 6.3 million new auto loans and leases issued so far this year, totaling over $178 billion. This is a decrease of 1.8% in loan balances compared to last year, but it shows a recovery from the pandemic. Despite higher interest rates and expensive vehicles, the share of prime auto loans has been steady at 13.5% after declining since 2020.¹

In the banking sector, there has been a slight decrease of 4.5% in the credit limits issued so far this year. The total amount stands at $105.6 billion as of March 2024. The number of new bank card accounts opened this year is 17.3 million, which is an 8.7% decrease from last March when it reached a record high of 19 million. This decline is partly due to lenders being more careful about whom they lend to, as they have noticed more people struggling to make payments on time. However, the average credit limit for new bank cards has increased by $6,000, a 12% rise compared to last year. The share of subprime accounts, held by people with lower credit scores, continues to decrease, now at 2.9% after peaking at 4% in 2021.¹

For personal loans, nearly 3 million installment loans have been started this year, which is 10.2% less than last year. The total amount loaned is $12.6 billion, down 6.6% from last year's $13.5 billion. The share of subprime loans has also dropped, now making up 48% of all installment loans and about 34% of their total amount borrowed. In private label cards, 4 million have been issued so far this year, totaling $11.5 billion, a 9.6% decrease from last year's $12.7 billion.²

As of May 2024, total consumer debt in the U.S. has reached $17.4 trillion, which is 2.9% higher than a year ago. Mortgage debt, which includes first mortgages and home equity loans, makes up $12.7 trillion of this total, with first mortgages alone accounting for $12.1 trillion, representing 73% of all consumer debt. Non-mortgage debt, totaling $4.7 trillion, makes up the remaining 27%. Auto loans and leases contribute nearly 35% of non-mortgage debt, increasing by 2.8% over the past year to $1.6 trillion. Student loans account for almost 32% of non-mortgage debt, totaling $1.5 trillion, while credit card balances make up about 28%, increasing by 8.8% year-over-year.³

Currently, delinquency rates for most loans, except mortgages, remain higher than before January 2020. Auto loan delinquencies for payments 60 days or more overdue are close to levels seen during the Great Financial Crisis.4 Credit card delinquencies have decreased over the past six months but are still elevated compared to pre-pandemic levels, although they are not as high as during the Great Recession.⁴

On a more positive note, mortgage delinquencies, both in terms of number of loans and dollar amounts, are lower than both pre-pandemic levels and those seen during the Great Financial Crisis. Personal loan delinquency rates remain higher than before the pandemic but are lower than the peaks observed during the Great Financial Crisis.⁴

Looking at subprime trends, delinquency rates have started to stabilize after reaching highs last year. Overall, there has been a general decrease in delinquencies over the past six months, with additional analysis provided earlier this year comparing current levels to those in January 2020, before the COVID-19 pandemic.⁴

When analyzing auto loan delinquencies by generation, we find that Gen Z and millennials consistently have the highest rates of late payments. In contrast, boomers consistently show the lowest delinquency rates in both categories, while Gen X and the silent generation fall in between.⁵

Furthermore, we see that delinquency rates have been increasing fastest among the silent generation, followed by millennials and boomers this year. However, there has been an overall decline in delinquencies across all generations recently, with slight increases or stabilization in some cases. Only Gen Z and Gen X have returned to their delinquency levels from January 2020 before the pandemic.⁵

When looking at delinquencies in the banking sector, we have examined them based on income levels; it is clear that lower-income groups consistently have higher delinquency rates compared to higher-income groups over time.⁵ This trend is not surprising, but it means that lower-income brackets are being scrutinized more closely.

Interestingly, while lower-income groups have been under scrutiny, delinquency rates among higher income groups have been increasing at the fastest rate. However, overall delinquencies for all income groups have been decreasing since the beginning of this year.⁵

Looking ahead, we need to monitor how this trend develops. It is possible that part of the decrease in delinquencies is due to seasonal factors, like tax returns, where people of all ages and income levels are using their returns to pay off debt. 

STAY IN THE KNOW

You can register for upcoming webinars, find our monthly Small Business Insights, and explore our National Consumer Credit Trends Reports on the Market Pulse homepage. All the Equifax data and insights presented on our Market Pulse webinars and this blog are pulled directly from these reports. 

In today’s dynamic economic landscape, forward motion is not just a strategy. It's a commitment to your customers. Challenging financial times require proactive planning, goal setting, and relentless momentum. To stay on top of all our insights and updates, make sure to follow the Equifax for Business LinkedIn page. Plus, don’t miss our Market Pulse podcasts, available wherever you listen to podcasts, where we will continue with more in-depth conversations on topics we have discussed here.

(c) Equifax Inc. 2024. All Rights Reserved. The static provided herein are for informational and illustrative purposes only and shall not be used for any other purpose.

Sources:

1. Equifax Market Pulse Credit Trends; Data are March YTD originations for each year in the series

2.  Equifax US National Consumer Credit Trends Originations Report - Published July 2024 - Data as of March 2024

3.  Equifax US National Consumer Credit Trends Portfolio Report - Published July 2024 - Data as of May 2024

4. Equifax: Market Pulse Credit Trends; Data through May 2024

5. Equifax Market Pulse Credit Trends; Data through January 2024; not seasonally adjusted