CUNA Chief Economist Mike Schenk discusses loan delinquency trends in America in this month’s CUNA Economic Update. Schenk breaks down current metrics such as household debt as a percent of disposable income and the financial health of Americans.
Highlights include:
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Mortgage delinquencies: With data obtained by Equifax, CUNA economists have found ‘slight upward movements’ in mortgage delinquency rates.
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Credit card delinquencies: Bigger increases in delinquency rates relative to the cyclical low – as seen during the COVID-19 pandemic – is concerning, said Schenk.
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Auto loan delinquencies: Data shows a ‘dramatic’ increase in delinquency rates among institutions such as auto financing companies.
“Credit unions tend to be more careful lenders. As not-for-profit cooperatives, owned by their members, they are less likely to make abusive loans and more likely to make loans in their members’ best interest.” – Mike Schenk
CUNA forecast
CUNA economists believe that delinquency rates will peak at 1% by the end of 2024. Net charge-off rates are also believed to be heading towards 70 basis points. Both forecasts are higher than long-term norms, but only modest in comparison to the Great Recession.
“The U.S. economy is not in recession at the moment. Experts say recessions are defined as a significant broad-based decline in economic activity that lasts for more than a couple of months. With the labor market as strong as it is, it is very difficult to say that this is a broad-based decline in economic activity.” – Mike Schenk