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Consumer credit problems nudge…
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Last modified on 7/2/2019 12:11 PM by User.

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Consumer credit problems nudge upward

I don't think the 2012 level itself is interesting (if you look at the historical chart provided by Axios, the worst was in 2010.

https://graphics.axios.com/hermes/2019-06-23-1935-loan-delinquency-rates/index.html?initialWidth=848&childId=av-hermes/2019-06-23-1935-loan-delinquency-rates-RSEQY&parentTitle=Consumer%20credit%20card%20delinquencies%20are%20on%20the%20rise%20-%C2%A0Axios&parentUrl=https%3A%2F%2Fwww.axios.com%2Fconsumer-credit-card-mortgage-delinquencies-aa53ad46-53d4-433c-9b20-2f3f44acb2b9.html

But this article called out a couple interesting not-so-good-news trends:

  • Consumer loans delinquencies are usually well behind real estate loans, but they crossed over about a year ago.
  • Although the rate consumer delinquencies is is trending up slowly, its been doing that steadily since 2015.
  • As an armchair quarterback, its hard to know how risky this is. If say only 50% of the US has a consumer loan, then 2.3% means that a bit more than 1% of the US population is behind on their credit cards.

However, with the periodic enthusiasm for raising rates, this is not good.

The underlying trend is that the spike was driven by 18-29 year olds being late, and their late entry into the credit card market. Overall debt has grown in the last 5 years via housing debt, but the trend that bothers me is that older 50-59 and 60-69 consumers are also increasingly late.

Card interest is predicted to be up to $122b, 50% more than 5 years ago, and rates are about 17% vs. 13%. 

2014 - roughly $80b of interest at 13%, implies $615b of debt.

2019 - roughly $122b of interest at 17%, implies $717b of debt.

If the 2019 debt and 2014 interest were mixed:

615 * 17% -> $104.5b in interest

717 * 13% ->

 

$122b @ 13% ->  $938b of debt.