Moody’s: U.S. Household, Credit Debt Grow Modestly, Auto Delinquencies Decline

Moody’s Investors Service, an American Credit rating firm, has released its quarterly Pulse of Consumer Credit report, and in a report emailed to PYMNTS, it showed some insights into the relationship between the population and its credit.

The firm believes that “household debt delinquencies are likely above their cycle low” and that “the effects of gradually-loosening underwriting standards and rising interest rates will begin to weigh on loan performance in the coming quarters.”

As for household debt, the rate of new household delinquencies is low and remains so, at 4.65 percent in Q4 of 2018. Household debt grew only 3 percent year-over-year in the fourth quarter, and that’s the slowest it’s grown in two years.

“We expect loan growth to pick up a bit given the solid employment market and high consumer confidence,” Moody’s said in the report.

Credit card delinquencies rose slightly from 6.33 percent a year ago to 6.65 percent. Moody’s predicts that they’ll continue to rise, putting into account rising interest rates.

“Year-over-year card balances grew 4.8 percent in Q3, considerably slower than they have over the last two years, a credit positive,” the company said.

Auto loan delinquencies, for their part, actually declined, from 7.21 percent a year ago to 7.09. These should be stable over the next year due to strong employment rates.

Moody’s also said that “Q4 balances grew 4.1 percent over the last year, only slightly faster than the 4.0 percent increase in Q2, which was the slowest pace since Q4 2011.”

When it comes to mortgages, new residential delinquencies rose a bit as well, to 3.55 percent from 3.4 percent about a year ago. Experts at Moody’s predict that the delinquencies will continue to go up slightly as home appreciation slows and lenders loosen credit standards.

“We expect originators to continue to ease underwriting standards modestly, causing residential mortgage underwriting to normalize and economic adjusted performance to remain around historical average performance,” the report said.