The share of subprime auto borrowers in delinquency has increased by more than 1 percentage point since last year.
The percentage of borrowers who were at least 61 days late on their payments was 5.13% in October, up from 3.76% a year earlier, according to Bloomberg. report Citing Fitch Ratings figures on Tuesday (Nov. 8).
In October 2021, interest rates fell as households with subprime auto loans still had cash from the stimulus package during the pandemic, the report said.
Those payments have ended, but consumers still benefit from low unemployment. According to the report, this put him at 3.7% in April, below his 10-year average of 5.3%.
The proportion of borrowers who are in arrears on these auto loans is increasing, while wholesale prices of used cars are falling, the report added.
Bonds tied to subprime auto loan obligations are threatened because cars act as collateral, according to the report.
As a result, yields on the riskiest of these types of bonds surged through September and October. Today, the spread between those bond yields and Treasury yields is the widest since 2010, outside of a few weeks during the pandemic.
As PYMNTS reported in April 2021, subprime car loan delinquency can be a sign of paycheck-to-paycheck consumers who rely on triage while managing their day-to-day financial lives. Consumers tend to pay their most pressing expenses first, such as rent and mortgage payments.
In related news, Discover Financial recently announced a credit card 30-day delinquency rate In the most recent quarter, it rose to 2.1% from 1.5% a year earlier.
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