Last week I highlighted a story about the bubble bursting in US auto loans and it seems that the problem isn't consigned to that one market.
This week the WSJ report that subprime lending is increasing rapidly with 4/10 loans going to subprime customers through most of 2014. Loans reached more that $189bn and the highest since 2007
Recent data from the New York Fed showed total household debt rose 2.7% to $306bn in Q4 2014 and the highest since Q3 2010
The rise in subprime borrowing has been seen across auto's, credit cards and personal loans
What you may be surprised about is that subprime mortgages are still being pretty well controlled following the blowup. However, it looks like the lessons learned there aren't carrying over into other areas.
One of the reasons why lending is rising is due to the increase of non-bank lending firms. One firm has seen loans rise 761% since 2013
"We're going from an era where for many years credit was extremely tight to an era where credit is now looser,"
What could go wrong eh?
Before we start jumping on the "this is the big next crisis" bandwagon just yet, we should remember that credit needs to flow through every part of the economy, and through both prime and subprime channels. It's the nature of the beast. The fact that we are quickly approaching pre-crisis levels of debt should be a worry. The question is whether the powers that be are sufficiently monitoring the levels better this time around than they did for the subprime mortgage market. I don't know about you but I think that it's probably a fantasy to think they are.
The full story from the WSJ is here
