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UBS: Nearly $1 trillion in mortgage debt could be delinquent this year as a 'prolonged credit crunch' looms

UBS: Nearly $1 trillion in mortgage debt could be delinquent this year as a 'prolonged credit crunch' looms
Associated Press



The late-March spike in unemployment stands to drive more than $1.1 trillion in debt delinquency across credit card, mortgage, and auto loans, UBS strategists said Monday.




The bank's consumer credit health gauge hit its worst reading since late 2009 in the first quarter due to the jump in joblessness and weakening economic sentiment.




The sharp increase in jobless claims suggests $950 billion in mortgage debt will reach delinquency in 2020, the firm said.




Up to $110 billion in credit card payments and $60 billion worth of auto debt can also run late should the unemployment rate reach UBS's 12.6% estimate.




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The soaring US unemployment rate is placing $950 billion in mortgage debt at risk of delinquency, UBS highlighted in a Monday note.
The nationwide coronavirus shutdown is placing a significant burden on consumer debt. UBS's credit health indicator posted to its worst reading since late 2009 in the first quarter, driven higher by spiking unemployment and weakening consumer sentiment. Slowing car and home sales will further drag on the metric in the coming weeks, UBS said.
The firm's biggest questions now focus on how bad the debt market fallout might be. A survey of 2,000 households showed early signs of stress brewing for consumer credit, with 14% of homes saying they'll likely miss a payment. Credit card debt was listed as most likely to default, followed by mortgage and auto loans.
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