The credit performance of American consumers deteriorated in May as mortgage and auto loan delinquencies ticked up, Moody's Analytics said in its June household credit report.
The ratings giant said the uptick in delinquencies is tied to increased concerns over what is happening with the European sovereign debt crisis and weakness in the labor market.
Moody's says the dollar delinquency rate across all loan products grew 20-basis points, or up 5.6%. Much of that was driven by an increase in the number of mortgages that are 120 or more days delinquent.
"The overall level of outstanding credit continued to decline because of the write-off of $24 billion of troubled first mortgages in May," Moody's said. "Outside of mortgages, credit markets are reviving as consumers look to satisfy some pent-up demand. Auto lending continues to expand at a strong 6% rate, while retail credit is growing at a 4.5% pace."
Still, even though they are performing at a weaker pace, delinquency rates for the 30-, 60- and 90-day delinquencies remain well below their prerecession levels.
The overall delinquency rate on mortgages that are 120 or more days past due increased by 18-basis points for the first time in two years. As for where Americans are placing their debt. Many households continue to borrow for education expenses, hoping that it will pay returns when the economy recovers.
At the same time, consumers are wary of bankcard credit. The new credit lines opened tend to be the result of more affluent borrowers using their financial strength to access more credit.
"Households are clearly using their credit cards more judiciously than in past years," Moody's said. "The dollar delinquency rate for bankcards declined from 3.2% in April to 3.1% in May, while the rate for retail cards declined 5-basis points to 4.9% and consumer finance declined 8 basis points to 6.2%."