[Market Brief] Can the US default risk be controlled? A comprehensive breakdown of credit cards, auto loans, and mortgages!

What we want you to know:

Yesterday, the U.S. January employment report was released. Although non-farm payrolls exceeded expectations, after revisions to the 2025 annual benchmark, employment growth was revised down from +580,000 to +181,000, with the average monthly increase falling from 49,000 to 15,000—almost stagnating. This raises concerns about whether a weak labor market might undermine consumer spending.

Meanwhile, delinquency rates have been rising since 2023, with a continued increase in the proportion of seriously overdue loans (over 90 days late) among U.S. consumers. The rise is especially notable in credit cards, auto loans, and student loans, indicating that some households are under increasing financial pressure. The latest figures released this week also show that delinquency rates remain high. Against the backdrop of high living costs, improving affordability may become a key factor for the Republican Party in the 2026 midterm elections.

In this article, we will analyze the default risks in key areas such as credit cards, auto loans, and mortgages, and discuss whether these risks can remain manageable amid inflation crises, tariff shocks, and a K-shaped economy in the U.S.

1. Credit Cards and Auto Loans: High Delinquency Rates, but Expected to Improve

First, we focus on the sharply rising delinquency rates in credit cards and auto loans, examining from two perspectives: overall leverage health and detailed delinquency data.

Overall Leverage Health: No Significant Pressure on the Private Sector

Despite widespread concerns about U.S. debt issues, it’s important to note that the structural debt burden mainly affects the government sector, not the private sector. According to the Federal Reserve’s semiannual Financial Stability Report, in recent years, corporate and household debt as a percentage of GDP has continued to decline. Household debt relative to disposable income has fallen to its lowest level since the 2000s. Additionally, the proportion of household debt payments to personal disposable income remains at a low level not seen in nearly 20 years, indicating that private sector leverage is healthy and there is no urgent need for deleveraging.

Delinquency Rates: Early Signs of Improvement Are Emerging

[Content missing or incomplete in the original text]

Are you already a subscriber? If so, please log in here.

Become a subscriber to enjoy full services of M Square.

Unlimited macro chart browsing
Stay on top of key indices for global investments and commodities.

Exclusive Focus Reports
Approximately 6-8 exclusive reports per month on major events and data analysis.

Research Toolbox
Create custom key charts and backtest performance.

Most Professional Macro Community
User secret indicators and opinion sharing.

Subscribe now.

[Additional subscription prompts and links omitted for brevity]

Click questions to let MM AI answer for you

When will credit card and auto loan delinquencies improve?
💡
The delinquency situation for credit cards and auto loans is expected to improve this year. The rising trend in mild delinquencies has slowed, with credit card delinquency rates decreasing across all income groups, and middle-to-high income groups in auto loans stabilizing. These are leading indicators approaching their peaks.

Why is the private sector leverage healthy in the U.S. without pressure?
💡
The private sector’s leverage remains healthy because corporate and household debt as a percentage of GDP has continued to decline, with household debt at its lowest since the 2000s, and household debt payments as a share of disposable income staying at a low level for nearly 20 years.

Why have U.S. mortgage delinquencies remained low over the long term?
💡
U.S. mortgage delinquency rates have stayed low mainly because housing demand stopped deteriorating and rebounded since 2023, inventory and vacancy rates are stable, and structural changes after 2008—such as stricter risk controls and a lower proportion of variable-rate loans—have contributed.

What impact has the Fed’s rate cuts had on the housing market?
💡
With the start of the rate-cut cycle at the end of 2024, data from MBA mortgage applications show that applications for home purchases and refinancing have been rising since 2025, indicating that the rate cuts are effectively boosting housing market momentum.

What is the current state of housing inventory and vacancy rates?
💡
Although new home inventory is high, the inventory of existing homes accounting for over 80% remains at historically low levels, indicating a healthy overall housing market structure. Vacancy rates are stable, with the vacancy rate for homes for sale remaining at a historic low, and rental vacancy rates recently slowing in growth but still low.

How do Trump’s policies affect the housing market and low- to middle-income families?
💡
Trump’s policies are shifting toward “Make America Affordable Again,” introducing measures such as banning institutional investors from purchasing single-family homes and encouraging Fannie Mae and Freddie Mac to buy more MBS to suppress mortgage rates, helping to stabilize home prices and support consumption among low- and middle-income households.