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Large Bank Credit Card and Mortgage Data 2023 Q2 Narrative

Q2 2023 Insights Report

by Brandon Goldstein & Andrew Kish
Released: October 5, 2023

Card and Mortgage Balances Hit New Highs, but Remain Below Record Levels When Adjusted for Inflation

Card lending continued its rapid growth, with large bank card balances rising by double digits from one year ago. When adjusting for inflation, however, the data still indicate an industry that is normalizing rather than expanding. Even with the recent increases, inflation-adjusted card balances are lower than the previous series peak more than three years ago. Overall credit card utilization and average card balances, after factoring in inflation, are within historical norms.

New card originations suggest a continued appetite for credit. New credit card accounts rose 7.3 percent from the previous quarter, and credit card dollar originations hit a more than six-year high in the second quarter after adjusting for inflation. Credit performance is weakening, with the balances-based 30+ days past due rate rising for the fourth consecutive quarter. The small deterioration in card delinquency in the second quarter is notable, given that in the prior 10 years, card delinquency had always improved in the second quarter as tax refunds help card performance. Continued deterioration and high nominal card balances pose a downside risk.

Mortgage rates are the highest since FR Y-14 institutions began reporting mortgage data, according to Freddie Mac, curbing mortgage originations. Mortgage delinquency remains exceptionally low, and risk measures are stable, but early-stage delinquency rates rose slightly in the latest quarter, indicating a potential turning point for credit performance.

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Inflation-Adjusted Card Balances Are Shy of Record Set in 2019

While total nominal credit card balances hit a record high in second quarter 2023, inflation-adjusted card balances are still 9 percent below the record set at the end of 2019. Additional measures of card exposures, when adjusted using the U.S. consumer price index, also underscore how inflation has been an important contributor to the headline credit card exposure numbers. Total nominal credit card commitments and average new credit card lines are at or near series highs in our data. However, inflation-adjusted card commitments are still 3 percent below the peak in early 2020, and real average new credit card lines are just slightly above historical levels.

Credit Card Utilization Is in Line With Historical Norms

Credit card utilization, defined as the percentage of credit used from the total available credit limit, averaged 19.4 percent in the first half of 2023, down slightly from 19.9 percent in the five years preceding the pandemic. This indicates that current card usage, at least at an aggregate level, is typical. Similarly, active account balances, whether viewed at the median, 75th, or 90th percentile, are still below historical levels when adjusted for inflation. One causal factor is that with credit card interest rates at all-time highs, according to Bankrate, the share of customers who pay their balance in full and therefore avoid interest charges has remained elevated.

New Mortgage Accounts Are Near Reported Lows, While House-Price-Adjusted Average Balances Inched Downward

Interest rates on 30-year fixed-rate mortgages reached their highest since the second quarter of 2006. Driven in large part by these high rates, the June 2023 homeownership affordability measure, as reported by the Atlanta Fed, was the third lowest since January 2006. Consequently, the number of new mortgage accounts has tumbled, down 75 percent in the second quarter relative to two years ago. Nominal total mortgage balances continue to grow, but house- price-adjusted average mortgage balances decreased 2.5 percent this quarter. The debt-to-income and loan-to-value ratios held from the first quarter of 2023.

  1. Disclaimer: The views expressed in this report are solely those of the authors and do not necessarily reflect the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.

Note that historical data will be revised periodically for firms that have started or stopped reporting FR Y-14M data and the panel of published FR Y-14M reporters is adjusted. Therefore, historical values may change over time. Please see our data methodology for further details.