- Total consumer debt swelled to $17.5 trillion in Q4, a $212 billion jump from the previous quarter.
- Delinquencies are rising among younger borrowers in particular, the New York Fed said.
- Younger borrowers have surpassed pre-pandemic levels of credit card delinquencies.
Younger Americans are falling behind on paying credit card and auto loans, with the rate of late payments rising above pre-pandemic levels in the last quarter, the New York Federal Reserve said in a report.
Data from the New York Fed showed a persistent surge in credit card and auto loan delinquencies as total consumer debt swelled to $17.5 trillion in the fourth quarter, increase of $212 billion from the previous three months.
Total credit card balances hit $1.13 trillion and auto loans outstanding increased to $1.61 trillion.
Serious defaults on debt, defined as being 90 days or more past due, were particularly prevalent among young borrowers and low-income households, prompting the NY Fed to flag the groups as at risk of “increased financial stress.”
“Serious credit card delinquencies increased across all age groups, notably with younger borrowers surpassing pre-pandemic levels,” New York Fed researchers wrote.
“Delinquency tends to decrease with age, and younger generations have delinquency rates slightly higher than their predecessors,” they added in a separate post.
Thanks to climbing interest rates since the Fed began its policy-tightening cycle in March 2022, affordability for loan products ranging from mortgages to credit cards to personal loans has become strained for many Americans.
The fed funds rate hit the highest level in 23 years in the central bank’s latest hiking cycle. That has meant the typical rate on credit cards jumped from about 14.5% to 21.47%, according to Fed data.
Previously, Moody’s analysts highlighted that young adults are still not in their peak earning years, yet they’re still feeling the impacts of inflation. Meanwhile, lower-income borrowers may have already used up a significant portion of their excess savings.
Mortgage debt increased by 2.8% in 2023, with the delinquency rate climbing to 0.82%, marking a quarter-percentage-point rise from the previous year.