Cash Out Refis 10-Yr High, Private-Label Credit Card Delinquencies at 7-Yr High

If you think the economy is improving, you better check your facts and some disturbing trends.

Despite the much ballyhooed "strong jobs" economy, things are not what they seem upon closer inspection.

For example, Store-Branded Credit Card Delinquencies Hit 7-Year High.

The share of private-label credit cards with accounts at least 60 days delinquent is 4.65%, up from 4.08% in March 2017, Equifax said Wednesday. That’s the highest since early 2011, the credit reporting agency said.

Some banks have expanded their lending to subprime borrowers as the economy has improved, says Matt Schulz, senior industry analyst for CreditCards.com.

Private-label credit card interest rates are higher than credit cards generally. They have been rising as the Federal Reserve has boosted short-term rates since late 2015, increasing the payment burden on those subprime borrowers. The rate for private-label cards is about 25.5%, up from 24.99% six months ago, according to CreditCards.com. The average rate for all credit cards is 16.73%, up from 16.15%.

Who Can Afford 25% Rates?

Who can afford 25% interest rates with balances rolling over every month?

The answer, of course, is no one.

This leads up to what I will label the logical non-solution.

Logical Non-Solution

Data from Federal Housing Finance Agency show the Home ATM is Spewing Cash.

Equity pulled from homes to finance consumer spending and property improvements and pay off other debts rose in the first quarter to the highest in almost a decade, according to Federal Housing Finance Agency data.

Good Times

Let the good times roll baby!

The logical non-solution works only so long as home prices keep rising, employment stays elevated, and credit keeps expanding.

I suspect the party is about over.

For further discussion, please see my prior report Housing ATM is Back (But it won't work any better this time).

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April New Home Sales Slide 1.5%, March Revised Sharply Lower

Mike "Mish" Shedlock

Comments (23)
No. 1-22
hmk
hmk

I just heard on one of the MSM channels that the decline was probably an abberation and that YOY home sales were up 8.1%. Also heard the day before that deliquncies were very low, consumer debt was very low and bankruptcies were very low. I thought it didn't make sense when I heard this stuff so either they are outright lying or putting a statistical spin on the numbers. BTW I think auto sales are softening, I just got a incentive mailed to me by GM for adding $2000 in car rebates to my GM credit card that accumulate 500 dollars a year up to $3500 max, ie 7 years of credits. I have never recieved this much of an incentive offer before.

thimk
thimk

wonder if this data includes HELOC's. Why would anyone refi their mortgage at a higher rate? Unless it is a variable rate ?

Blurtman
Blurtman

Proof, once again, that the economy is crashing, and has been crashing since we exited the gold standard. Run for your lives!

CzarChasm-Reigns
CzarChasm-Reigns

Yes, the economy sucks for nearly everyone, but oddly enough, it's been great for the billionaires. "The super-rich are for the most part speculators. They derive their income not by contributing to the process of production, but by gambling, stealing and cheating. Among all billionaires, the portion of total wealth derived from shares of stock increased from 32.9 percent in 2016 to 41.5 percent in 2017." Selected quote above from "Wealth-X report shows billionaires gained $1.8 trillion in 2017" http://www.wsws.org/en/articles/2018/05/21/pers-m21.html There is No Trickle Down; just "Suck It Up".

Sechel
Sechel

25% rates are not designed for loans to be repaid. they are designed to extract enough money from the borrower before a default that the lender comes out ahead. At 25% we're talking usury.