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Household Debt Report Sees Delinquencies Nudge Higher

US
  • The earlier NY Fed household debt report for Q2 showed total debt increase $312B to $16.15T.
  • It's unchanged in relative terms though at 65.0% GDP, where it's held since 4Q21 and back at pre-pandemic levels having declined from a peak of 73.2% GDP in 2Q20.
  • Details within the release suggest little sign of imminent stress: The share of current debt transitioning into delinquency increased modestly for all debt types but remains historically very low. The outright share of mortgage balances 90+ days past due remained at 0.5%, a historic low, whilst it fell a tenth to 3.9% for auto loans and more heavily to 4.6% for student loans as a result of the CARES Act.
  • “65% of the $758B of newly originated mortgage debt in Q2 was to borrowers with credit scores over 760. 3% were originated to subprime borrowers, a sharp contrast to the 13% average seen between 2003-2007”.
  • “Although foreclosures have been very low due to the moratoria on new foreclosures and mortgage forbearances, 35,000 individuals saw new foreclosures on the credit reports, an increase from 24,000 in Q1. This potentially suggests the beginning of a return to more typical levels”.
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