Home Debt Consumer credit resilient even as debt, delinquencies rise

Consumer credit resilient even as debt, delinquencies rise

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Credit scores, particularly among borrowers in the mortgage market, have held up relatively well as inflation has risen, though some other indicators point to potential strain.

VantageScore’s measure, which isn’t commonly used for mortgages right now but could be in the future, showed on average consumers’ credit standing was stable on a consecutive-month basis at 696 in December.

At the same time, consumer debt levels have been rising, and signs of strain on payments are emerging, according to VantageScore’s monthly CreditGauge report.

For mortgages, the average balance in December was $251,800, compared to $236,900 a year earlier and $250,500 in November.

The average balance for other categories of consumer credit other than personal loans rose as well, with the number for auto loans increasing to $22,900 from $222,800 a month earlier and $21,300 in December 2021. For credit cards, the average balance owed rose to $5,900 from $5,600 the previous month and $5,200 a year earlier.

The average amount owed on personal loans remained stable on a consecutive month basis at $16,700. However, it was still up from $15,300 in December 2021.

A rise in non-mortgage debt levels has implications for home loans. Consumer debt-to-income levels have arguably been used as an indicator of payment risk for single-family financing, and two key secondary market investors recently adjusted some of their fees linked to DTIs.

Delinquency rates tracked by VantageScore rose but remained below pre-pandemic levels.

Mortgages late by 30-59 days jumped 10 basis points to 0.7% from 0.6% in November, and were up from 0.49% a year earlier. In January 2020, the equivalent delinquency rate was 1.22%.

Home loans 60-89 days late inched up to 0.2% of the total from 0.18% a month earlier, and were elevated compared to 0.12% a year ago. At the beginning of 2020, the 60-89 day delinquency rate was 0.43%.

Finally, mortgages late by 90-119 days rose a basis point on a consecutive month basis to 0.08% of the total, up from 0.05% a year earlier. The 90-119 day mortgage delinquency rate was 0.17% in January 2020.

Increases in delinquency rates across consumer credit have been most prominent in the 30-59 days past due category, with late payments in non-mortgage loan types nearing pre-pandemic levels. Credit card delinquencies were only a basis point lower than their January 2020 number at 0.61% in December. The short-term delinquency rate for personal loans was 0.88%, compared with 0.95%. For auto financing, it was 2.06%, compared with 2.16%.

Even longer-term past dues exhibited some signs of trending up in December.

This was not only true in the VantageScore numbers, but in some others. Last month Fannie Mae, a large mortgage-related government investor known for generally having strong loan performance recorded its first uptick in its serious delinquency rate since August 2020.

To be sure, the increase in the Fannie number was only a single basis point (0.65% compared to 0.64% the previous month) and could be an aberration. However, it was striking in that the downtrend in this area had been very consistent up to that point. In January 2020, Fannie’s serious delinquency rate was 0.66%.

Freddie Mac, another government-related mortgage investor that’s similar to Fannie but a little smaller, had a stable serious delinquency rate of 0.66% in December 2022 compared to 0.6% in January 2020.

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