MNI BRIEF: Lower Income US Borrowers See Rise In Delinquencies

Lower income groups, younger workers and the unemployed are seeing rising delinquency rates through the fourth quarter of 2025, further evidence of a "K-shaped economy" in which lower paid workers struggle while the overall household debt picture remains relatively healthy, New York Fed researchers said Tuesday.

Delinquency rates, especially for non-mortgage debt, have stabilized in aggregate. Mortgage delinquencies saw a "very small worsening" but are performing well overall after bottoming out in 2021, the researchers told reporters ahead of the publication of the Fed bank's quarterly report on household debt and credit. 

However, the deterioration is concentrated in lower income areas and in areas with declining home prices, the Fed bank found. Borrowers in the lowest income zip codes have seen their 90+ day delinquency rates rising to 3.0% by end-2025 from 0.5% in 2021 while borrowers in the highest income zip codes continue to maintain historically lower delinquency rates, according to the report. 

Credit cards and auto loans have also leveled off, though at an elevated rate, with a 5.5% year-over-year change in card balances and USD181 billion in new auto loans in the fourth quarter, on par with previous quarters, the report found. (See: MNI INTERVIEW: Fed To Keep Cutting On Jobs Weakness - Tilley)