US affordability squeeze eases slightly as key delinquency metrics stabilize

US consumers are still under notable strain from high borrowing costs and past inflation, but several key delinquency and debt‑service measures have stopped worsening and even improved slightly, which is why the affordability “squeeze” is described as easing rather than ending.​

What is easing

• Economists note that household debt‑service payments as a share of disposable income are relatively low by historical standards and have been broadly stable in recent quarters, hovering a bit above 11% and remaining below levels seen before recent U.S. recessions.​

• Federal Reserve and other analyses show that credit card and auto loan delinquency rates, which had been rising post‑pandemic, flattened out heading into the third quarter of 2025 instead of continuing to accelerate.​

Key delinquency trends

• Overall credit card delinquency rates have edged down: one cited measure shows delinquencies at about 2.98% in September 2025, down from roughly 3.22% in mid‑2024, reversing part of the prior climb to the highest levels since around 2011.​

• When looking beyond the largest banks, delinquency rates at thousands of smaller U.S. commercial banks have fallen to below 7%, down from nearly 8% a couple of years earlier, suggesting some easing even for more vulnerable customer segments.​

Why the squeeze persists

• Consumers still face pressure from very high credit card interest rates, commonly above 20%, and from elevated balances in categories like mortgages and auto loans, which keep monthly payments heavy even if delinquencies are stabilizing.​

• Wage growth and a still‑functioning labor market are helping many households manage these burdens, but analysts warn that a weaker job market or renewed inflation could quickly push delinquencies higher again, so current optimism remains cautious.​

What drove the recent stabilization in delinquency rates

Recent stabilization in delinquency rates is mainly being driven by slower growth in new borrowing, tighter lending standards, and still‑positive wage growth that helps many households keep up with payments, even as overall stress remains elevated.​

Credit growth and lending standards

• Federal Reserve research links the flattening of credit card delinquencies to a slowdown in credit card borrowing since early 2024, which limits how quickly riskier balances accumulate.​

• The same analysis and industry data point to lagged effects of tighter underwriting and lending standards, meaning lenders have been more selective, particularly with higher‑risk borrowers, which supports better loan performance.​

Labor market and incomes

• Wage growth is still running above 4% annually on average, modestly outpacing inflation, which improves households’ ability to service existing debts despite higher rates.​

• Although unemployment has risen and the labor market is softening, most consumers remain employed, so income flows have not yet deteriorated enough to push delinquencies sharply higher across the board.​

Segment‑specific dynamics

• Subprime and lower‑income borrowers saw large delinquency increases earlier in the cycle, but some subprime credit card delinquency rates have edged down or stabilized in early 2025, contributing to a leveling in aggregate measures.​

• At the same time, stress is still building in pockets such as lower‑income households and certain auto and FHA mortgage segments, where delinquencies are rising again, which is why the improvement is described as stabilization rather than a broad-based recovery.​