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This means that consumers are now paying significantly more on existing debts, making it harder to manage monthly payments. The rising debt service costs are leading to increased delinquencies, and early signs indicate trouble ahead.
Warning Signs: Rising Defaults and Lending Tightening
The growth in delinquencies is a warning signal of troubling financial strains among households. Banks, observing these signs, are becoming more cautious in their lending practices:
Lending standards are tightening.
Approval rates for new loans are decreasing.
Borrowers with lower credit scores, such as those around 680, are finding it increasingly difficult to obtain new credit.