According to the Federal Reserve received two weeks ago, consumer debt America has never been on such a high level: at the time of December 31, 2017 the amount of liabilities on credit cards and the level of revolving credit determined by the level of $ 1 trillion, the volume of car loans amounted to $ 1.3 trillion, and the amount of student loans - $ 1.25 trillion.
At the same time there is an increase of unrealized commitments on payment of loans on credit cards and car loans. As a result, financial institutions and banks are increasing amounts of resources on the overlap negative credit defaults due to the forecast increase.
According to the expert of the TCW Hetta Melhorta, smaller US regulators, which are not included in one hundred leaders in terms of assets, are experiencing very strong loan write-off of activity in the past few months - about 7.9%.
This points to the fact that in order to predict the place of occurrence of the future of the consumer credit crunch, it is necessary to pay attention to smaller regulators.
However, only time will show: there is a chance that the NCO larger banks will be defined as another miracle of the average cycle, which took place against the backdrop of uplifts the US central bank rates in the mid 90s of last century, along with how the NCO smaller regulators normalized.
But in any case, the current policy of tightening the Fed may provoke a threat of an even wider NCO and a substantial volume of defaults that will be the result of raising the price of the loan service, in particular if Powell would raise rates by another 4 times this year and more than 4 times in the further future.
According to TCW, increase in interest costs and a reduction in credit standards due to strong competition helped to raise credit costs.
So, consumers all credit facilities were connected and creating leverage was again carried out, as opposed to in order to realize rational deleveraging.
Banks have become more strenuous reaction norms adrerraytinga: in recent months, almost 10% of banks said the introduction of more stringent rules and regulations of borrowing for credit cards.
Some facts are irrefutable:
1) over the last few years the level of credit card debt has increased substantially;
2) credit spending began to rise in 2016.
Not so long ago, lenders have increased rates, and it is predicted that high NCO value of the increase will be reduced. The percentages of credit cards act as the annual proportions - the ratio of complex financial expenditure to the general to the average balance sheet for which costs have been implemented as planned Fed.
According to statistics for the third quarter of 2017, the rate rose to the level of 15%, which corresponds to the last record cycle. The difference between the assessed rate and said average APR's, which to a large extent indicates the growth rates in the Fed increases.
Border on credit cards in the amount of $ 3.5 trillion, close to the previous peak in 2008, and the application rates are still at a low level. However, what provokes the increase of spending on consumer loans in the positive economic situation, which is characterized rapid growth in the economy over the past few years.
Some possible factors:
1) reducing the number of working positions and sluggish wage growth;
Thus, employment growth demonstrates delays in recent years, and the level of income increases by 2-2.5%, along with how to increase the rent, food and many other items of trade. As a result, the amount of savings are reduced due to new spending that are provided by credit enhancement.
2) Consumer debt and part of the real income of staying at the highest possible limits: consumer loans retained at around $ 3.8 trillion, going beyond the peak in 2008 at a value of 45% and equal to maximum 29% of the part of the real income customers and account for 19% of the nominal GDP;
3) the amount of monetary liabilities increased security: parameter decreased from the period of the Great financial decline, taking into account the undervalued mortgage accounts and lower rates.
If we take into account the cost of health care, the rate is substantially increased, which complicates the execution of the debt burden. But due to the fact that the major credit trends become worse, the Fed raises interest rates, which of course, increases the level of write-offs of loans.
And if you take into account the low level of inventories and the rise in leverage, the consumer will be in jeopardy and likely to remain vulnerable to the future by raising interest rates.