October Economic Update covers loan delinquency trends

CUNA Chief Economist Mike Schenk discusses loan delinquency trends in America in this month’s Economic Update, and breaks down current metrics such as household debt as a percent of disposable income and the financial health of Americans. 

“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,” he said.  

Highlights include:  

• Mortgage delinquencies: With data obtained by Equifax, CUNA economists have found ‘slight upward movements’ in mortgage delinquency rates.  
• Credit card delinquencies: Bigger increases in delinquency rates relative to the cyclical low – as seen during the COVID-19 pandemic – is concerning, said Schenk.  
• Auto loan delinquencies: Data shows a ‘dramatic’ increase in delinquency rates among institutions such as auto financing companies. 

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," Schenk said.