Archive for the ‘Auto’ Category

Is the New Household Debt Record Cause for Concern?

Posted on June 14, 2017 by Laura Lam

Last month, the New York Federal Reserve reported that household debt across the nation has hit a dubious milestone in the first quarter: It surpassed the peak debt level of 2008 at $12.7 trillion. Household debt — including mortgages, auto and student loans, and credit cards — rose $149 billion compared with the last quarter of 2016, with nearly all the gain coming from mortgages. Reaching the peak raises questions about whether the backdrop exists again for another financial meltdown.  But the data show the current structure of debt is substantially different from 2008. According to a research officer at…

Household Debt Hits New Record

Posted on May 23, 2017 by Laura Lam

Household debt is topping its 2008 peak prior to the housing crash. Total household debt has risen to $12.73 trillion in the first quarter, the Federal Reserve Bank of New York reported last week. However, Americans are handling their debt—mortgages, credit cards, auto loans, and other forms of borrowing – much better, the report shows.  Americans were delinquent on 4.8% of total debt in the first quarter. For comparison, at the end of 2009, 11.9% of consumers were delinquent on their debt by at least 30 days. The increase in household debt may indicate that more Americans are confident about…

American Households Spend 53% of Its Income On These Expenses

Posted on May 19, 2017 by Laura Lam

If there’s one fairly steady theme over the past couple of decades, it’s that consumers are saving less of their income and their household budgets are being pushed to the limit.  According to the St. Louis Federal Reserve Bank’s February data, the personal saving rating in America was a paltry 5.6%. Comparatively, U.S. workers were socking away more than 12% of their paycheck 50 years ago.  At the same time, a number of household expenses have largely outpaced the inflation rate and wage growth. These include healthcare costs, college expenses, and in recent years housing costs, since home prices have…

Millennials’ Debt Load Could Weigh Down Economy

Posted on May 09, 2017 by Laura Lam

Millennials — 21 to 34-year-olds — hold an estimated $1.1 trillion of the country’s $3.6 trillion in consumer debt, according to UBS, as rising student and auto loans outweigh a drop in mortgages.  All that rising debt is coming with rising default risks. A UBS evidence lab survey found that 52% of people worried about defaulting on any loan over the next 12 months were in the 21 to 34 age group. That’s not good news considering those same individuals are meant to be the largest source of spending on big-ticket purchase items like houses and cars over the next year.  There is already…

Millennials Warm Up to Homeownership

Posted on April 27, 2017 by Laura Lam

For the second year in a row, Bank of America has conducted its Homebuyer Insights Report, which explores the attitudes, behaviors and preferences of current homebuyers. This year, a major focus was on millennials who are beginning to change their perspective on home buying.  According to Steve Boland, head of consumer lending for Bank of America, they surveyed young adults who had pulled the trigger and that it was the right decision.  “They are telling their millennial counterparts who are sitting on the sideline … this is going to be a great decision, it will help with your personal and…

Consumer Defaults Predicted to Rise in 2017

Posted on April 24, 2017 by Laura Lam

About 17% of all U.S. consumers are likely to default on a loan payment over the next year, according to a recent report from UBS. More interesting, perhaps, is who these defaulters are.  The UBS Evidence Lab reports that the group’s profile is “middle and upper income, younger, male, urban, and concentrated in the coastal regions.” The UBS researchers also found evidence that defaults on auto loans are likely to spread to more non-prime defaults on credit cards and personal loans. About 16% of all auto loans outstanding are subprime, amounting to $179 billion out of total auto loans of…

Student Loan Debt May Have Adverse Long-Term Impact

Posted on April 17, 2017 by Laura Lam

Rising student loan debt in the United States could ultimately hurt overall home ownership and consumer spending and erode colleges’ and universities’ ability to elevate lower-income students.  New York Fed President William Dudley, an influential monetary policymaker who was citing research from his institution, pointed to rising costs of higher education and student debt burdens as culprits in the troubling trend. Overall U.S. household debt is expected to surpass its pre-recession high later this year. Proportionally, Americans have shifted away from housing-related debt and toward auto and student loan debt, with aggregate student loan balances $1.3 trillion at the end of last year, up…

Auto Loan Defaults Not Likely to Cause Next Bubble

Posted on April 10, 2017 by Laura Lam

An increase in the delinquency of risky auto loans probably won’t send the U.S. economy into the doldrums the way the mortgage loan crisis did in 2008-09, but it will likely pinch car sales.  Borrowers are falling behind on most subprime car loans, but deep subprime consumers – those with credit scores below 550 – have deteriorated fastest, according to a report by Morgan Stanley. Just like mortgages, many of those loans have been packaged into bonds, “securitized” in Wall Street parlance, and sold across the world to investors searching for yields in the wake of the financial crisis. Car…

Bank Card and Mortgage Defaults Tick Upward

Posted on April 06, 2017 by Laura Lam

Data from the recent S&P/Experian Consumer Credit Default Indices report shows the composite rate up two basis points from last month at 0.94% in February. The bank card default rate recorded a 3.22% default rate, up one basis point from January. Auto loan defaults came in at 1.05%, down one basis point from the previous month. The first mortgage default rate came in at 0.74%, up two basis points from January. The 5 major cities showed mixed results in February with two higher default rates, two lower, and one unchanged. Dallas had the largest increase, reporting 0.83%, up eight basis…