U.S. Consumers May be Nearing a Tipping Point

Coral Gables, Florida, September 21, 2022:  BauerFinancial, Inc., the nation’s premier Bank and Credit Union rating firm, sheds light on the fact that early-stage consumer delinquencies are beginning to head up. While the more severe delinquent loans are holding at very low levels, for the first time in several years we see both banks and credit unions reporting upticks in early-stage past due loans (missing one or two payments). This could be a precursor of things to come.

This finding coincides with a release by the Federal Reserve Bank of New York which reported “The average perceived probability of missing a minimum debt payment over the next three months increased by 1.4 percentage points to 12.2%, its highest reading since May 2020. This increase was broad based across demographic groups.” (FRBNY Sept 12, 2022)

“The numbers speak for themselves,” cautions Karen Dorway, president of BauerFinancial, “over the 12 month period ending June 30th, banks reported that loans to individuals increased by 11.6% primarily due to credit card loans, which were up 14.1%. At the same time, loans reported as 30-89 days past due jumped by 25%. It appears that consumers may have reached the tipping point between leveraging untapped value in their homes while rates were low and managing debt to income ratios as rates rise.”

While the majority of federally-insured banks and credit unions remain solid, the percent rated 2-Stars or below, and thus relegated to Bauer’s Troubled and Problematic Bank Report is at its highest percent since the third quarter of 2018. Bauer’s Troubled and Problematic Credit Union Report, similarly, contains more than 3% of the industry, a number last seen in the third quarter of 2014.

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