Introduction

In 2023, the financial landscape was marked by a unique blend of resilience and caution. As interest rates climbed, consumers, policymakers, and bankers closely monitored the economic environment. Despite concerns about a potential downturn, the year ended on a note of stability. This article delves into the key trends in consumer credit and debt in 2023 and offers insights into what borrowers can expect in 2024.

Average Credit Score in the U.S. Increases to 715

As of the third quarter of 2023, the average FICO® Score in the U.S. rose to 715, a slight increase from 714 in 2022. This stability in creditworthiness is a positive sign, indicating that consumers are managing their debts responsibly despite higher interest rates.

U.S. Consumer Debt Snapshot

Average loan balances grew across most types of consumer debt in 2023. Credit card balances saw a significant increase of 10%, reaching an average of $6,501. Personal loans and auto loans also experienced growth, with balances rising by 6.3% and 5.2%, respectively. Mortgage balances increased modestly by 3.4%, reflecting the impact of higher interest rates on the housing market.

Loan Interest Rates Jumped in 2023

The rise in interest rates had a profound impact on borrowing costs. The average interest rate for a 30-year fixed-rate mortgage increased to 7.31%, while auto loan rates for new five-year loans jumped to 7.88%. Credit card interest rates also surged, reaching an average of 22.77%.

Average Total Debt Levels up in Most States

Despite a modest 2.3% increase in average total debt in 2023, consumers continued to manage their financial obligations effectively. States with higher residential real estate prices, such as California and Washington, typically have larger total debt loads due to the significant impact of housing costs.

Credit Utilization and Delinquency Rates Continue to Increase (but Slowly)

Average credit card debt increased significantly in 2023, with credit utilization rates rising from 28% to 30%. Delinquency rates also saw a slight uptick, but they remain below pre-pandemic levels. As of Q3 2023, 2.01% of accounts were 30 to 59 days past due, while 0.81% of accounts were 90 days or more past due.

What Borrowers Can Expect in 2024

Looking ahead to 2024, borrowers can anticipate a potential decline in interest rates as the Federal Reserve is expected to begin lowering rates. However, the timing and extent of these decreases remain uncertain. Consumers should also prepare for tighter budgets, with higher monthly payments for auto loans and the resumption of student loan repayments.

Loan officers are likely to remain cautious, limiting the amount they are willing to lend and charging higher interest rates to consumers with lower credit scores. Despite these challenges, the anticipated lower interest rates and tamed inflation could improve consumer sentiment in the coming months.

Contact O1ne Mortgage for Your Mortgage Needs

At O1ne Mortgage, we understand the complexities of the current financial landscape and are here to help you navigate your mortgage needs. Whether you’re looking to buy a new home or refinance your existing mortgage, our team of experts is ready to assist you. Call us today at 213-732-3074 to discuss your options and find the best mortgage solution for you.