Auto loan underwriting standards appear to have been relatively steady during the pandemic, with the median score of newly originated loans staying roughly constant-and relatively high-during the past few years. However, a look into our CCP data suggests this is unlikely. This difference between credit card debt (variable rates) and auto loans (fixed rate) is consistent with the pattern of delinquencies rising faster for credit cards than for auto loans and may be evidence of higher interest rates driving some of the increase in delinquency.Īnother possibility is a worsening in underwriting standards-perhaps it has been easier for those with lower credit scores to borrow, and this is starting to show up in the debt performance. On the other hand, most auto loans are fixed rate loans, so only auto loans taken out more recently faced these higher rates. As interest rates rise, so does the cost of borrowing, and higher interest rates result in higher minimum monthly payments for credit card balances. One contributing factor may be rising interest rates. There are many potential factors behind these worsening delinquency rates, although the relative impact of each on the financial distress of households is somewhat uncertain. (These rates are higher than the balance-weighted ones shown in the Quarterly Report because low-balance borrowers are generally more likely to become delinquent.) The chart disaggregates these rates by age, and we see that this is particularly true for younger borrowers who have surpassed their pre-pandemic rates, while for older borrowers, the rates are rising but have not yet reached their pre-pandemic levels.Īlthough the overall share of debt that is delinquent remains below pre-pandemic levels, the relatively high transition rates into delinquency suggest a rapid return to pre-pandemic delinquency rates for credit card and auto loan borrowers. Here, we see a slightly different picture-credit card borrowers are missing their payments and transitioning to 90+ day delinquency at a rate higher than they had before the pandemic. In the following two charts, we instead change the focus from balances to borrowers, by measuring the percentage of borrowers that transition into late delinquency during the quarter. The charts show a fairly large increases in auto loan and credit delinquency transition rates over the past four quarters from the unusually low levels reached earlier in the year and now are approaching pre-pandemic levels. The transition rates into early and serious delinquency, which are featured as pages 13 and 14 of our Quarterly Report on Household Debt and Credit, are balance weighted-the calculation for the 90+ transition rate, specifically, is the balance that moved from current or less than 90 days past due into 90+ days past due since the previous quarter. In this analysis as well as in the Quarterly Report we use our Consumer Credit Panel (CCP), which is based on anonymized credit reports from Equifax. These are increases in delinquency transition rates that appear relatively small, perhaps a return to pre-pandemic norms, but our closer look here reveals some worsening of delinquency rates among certain groups. Delinquency transitions in the fourth quarter ticked up as well, for credit cards, auto loans, and mortgages.

All told, the increase in credit card balances between December of 2021 and December of 2022 was $130 billion, also the largest annual growth in balances.

Mortgage balances, the largest form of household debt, drove the increase with a gain of $254 billion, while credit card balances saw a $61 billion increase-the largest observed in the history of our data, which goes back to 1999. Total debt balances grew by $394 billion in the fourth quarter of 2022, the largest nominal quarterly increase in twenty years, according to the latest Quarterly Report on Household Debt and Creditfrom the New York Fed’s Center for Microeconomic Data. Andrew Haughwout, Donghoon Lee, Daniel Mangrum, Joelle Scally, and Wilbert van der Klaauw

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