U.S. Household Loan Delinquencies Hit 8-Year High...Economic Polarization Deepens

Total Household Debt Balance at 18.8 Trillion Dollars
Up 0.3 Percentage Points from the Previous Quarter
Delinquency Rates Rising Mainly in Low-Income Mortgages
Student Loan Delinquency Rate at 16.3% in Q4 Last Year
Largest Increase Since 2004

Wall Street, New York.

U.S. household debt delinquency rates have risen to their highest level in eight years. As delinquencies have increased mainly in subprime mortgage loans, it shows that economic polarization is deepening within the United States.

According to the Household Debt and Credit Report released on the 10th (local time) by the Federal Reserve Bank of New York, total outstanding household debt in the United States stood at 18.8 trillion dollars at the end of last year, up 191 billion dollars (1.0%) from the previous quarter.

The overall household debt delinquency rate was 4.8% at the end of last year, an increase of 0.3 percentage point from the previous quarter. This is the highest level in eight years since the third quarter of 2017.

The New York Fed assessed that, although credit card and auto loan delinquency rates remain elevated, they have shown signs of stabilizing, whereas mortgage delinquency rates have continued to deteriorate.

In particular, the New York Fed analyzed that the rise in delinquencies is especially pronounced in areas where many low-income households live.

The New York Fed stated that there is a correlation between regional mortgage delinquency rates and unemployment rates, explaining that this suggests that the weaker a local labor market becomes, the more households in that area struggle to service their mortgage debt.

The unemployment rate among young people aged 16 to 24 reached 10.4% in December last year, the highest level since the COVID-19 period in 2021. Bloomberg reported that the student loan delinquency rate in the fourth quarter of last year was 16.3%, marking the largest increase since 2004.

Bilbert Vanderklaauw, economic research advisor at the New York Fed, and his co-authors diagnosed the situation by saying, "While household debt balances are increasing moderately, mortgage delinquencies continue to rise," and, "The deterioration in repayment capacity is concentrated in low-income areas and in regions where housing prices are declining."