General loan arrears increased, new accounts decreased in July

Both consumers and lenders are becoming more cautious about lending as the number of late payments on loans, including mortgages, is rising significantly.

The share of borrowers who are 30 to 59 days delinquent on auto, credit card, mortgage and personal debt recorded the largest monthly increase since over four yearsaccordingly Vantage scores Credit Gauge report for July. It includes 0.96% of all mortgage borrowers who were in early-stage delinquency last month, the second-highest figure this decade, according to the company.

While industry reports have noted some increase in monthly arrears, late payments for remain near historic lows.

Vantagescore made a weaker employment environment and the burden of high interest rates are responsible for the setbacks. Consumers opened fewer accounts of any kind last month than in the same period last year, while the number of mortgage loans has increased since The Federal Reserve Interest rate hikes in 2022.

“Both lenders and consumers are becoming more cautious about credit as many consumers have reduced their debt and used fewer loans,” said Susan Fahy, executive vice president and chief digital officer at Vantagescore, in a press release.

Consumers reduced their credit utilization by 0.02% to 51.6% in July, a four-year low according to the company. The average Vantagescore 4.0 credit score was 702, a score that has averaged above 700 for over a year.

Generation Z had the highest mortgage delinquency rates, with 1.21% of these borrowers facing early-stage delinquency and 0.45% being up to 89 days delinquent. Borrowers with incomes between $45,000 and $150,000, which the lender defines as “middle income,” had an early home loan delinquency rate of 1.17%, returning to pre-pandemic levels.

Millennials have the highest average mortgage amounts of any age group, with the average amount in July being $303,765. Mortgage amounts have increased 22% over the past four years for all borrowers as the limited housing supply has hurt affordability.

Consumers are now having relatively great difficulty paying off their auto loans, which have the highest average debt in July at over $24,000. Last month, 2.25 percent of these loans were 30 to 59 days past due and 0.83 percent were 60 to 89 days past due – both four-year highs, according to available Vantagescore data.

Major economic problems have so far been averted because the conditions car And Credit card credit Improvement in August. Industry leaders Fannie Mae and the Mortgage Bankers Association both expect two rate cuts by the Federal Reserve this year, but a week ago downgraded its forecasts for mortgage lending for the year.