General credit delinquencies up, new accounts down in July

Both consumers and lenders are getting more "credit cautious" as late payments for loans, including mortgages, are markedly rising. 

The rate of borrowers 30-to-59 days past due on auto, credit card, mortgage and personal debt saw its largest monthly hike in over four years, according to Vantagescore's Credit Gauge report for July. That includes 0.96% of all mortgage borrowers in early-stage delinquencies last month, the second-highest mark this decade per the company. 

While industry reports have found some monthly delinquency increases, late payments for home loans remain near historic lows.

Vantagescore blamed a weaker employment environment and the weight of high interest rates for the setbacks. Consumers last month opened fewer accounts of any type than the same time last year, while mortgage originations remain muted since the Federal Reserve's interest rate hikes in 2022. 

"Both lenders and consumers are becoming more credit cautious as many consumers de-leveraged and reduced credit utilization," said Susan Fahy, executive vice president and chief digital officer at Vantagescore, in a press release. 

Consumers reduced their credit utilization by 0.02% to 51.6% in July, a four-year low according to the company. The average Vantagescore 4.0 credit score was 702, a score which has sat on average above 700 for over a year.

Gen Zers had the highest mortgage delinquency rates, with 1.21% of those borrowers facing early-stage delinquencies and 0.45% up to 89 days late. Borrowers with incomes between $45,000 and $150,000, defined by the credit firm as "middle income," had an early-stage delinquency rate for home loans of 1.17%, reaching back into pre-pandemic levels. 

Millennials hold the highest average mortgage balances among age demographics, with an average balance of $303,765 in July. Home loan sizes for all borrowers have risen 22% in the past four years, as limited housing inventory has squeezed affordability. 

Consumers meanwhile have relatively significant struggles in paying their auto loans, which carry the largest average balances, over $24,000 in July. Last month, 2.25% of those loans were 30-to-59 days late, and 0.83% were 60-89 days past due, both four-year highs according to available Vantagescore data. 

Larger economic pain has so far been staved off, with conditions in auto and credit card lending improving in August. Industry leaders Fannie Mae and the Mortgage Bankers Association both anticipate two interest rate cuts this year from the Federal Reserve, but a week ago both downgraded their mortgage origination forecasts for the year.