Rising Mortgage Delinquencies & Housing Affordability Concerns

Housing affordability pressures are no longer solely impacting prospective homebuyers. A growing number of existing homeowners are falling behind on their mortgage payments, signaling a broader strain on household finances. Late-stage mortgage delinquencies – those 90 days or more past due – rose 18.6% in December compared to the same period a year earlier, according to research from VantageScore.

While the overall percentage of delinquent mortgages remains relatively low, at approximately 0.2% as of December, up from 0.17% in December 2024, the pace of increase is concerning. This growth is occurring at a faster rate than delinquencies in other consumer credit categories, including auto loans, credit cards, and personal loans, noted Rikard Bandebo, chief strategy officer and chief economist for VantageScore.

The rise in delinquencies comes as households grapple with a confluence of economic headwinds. Costs for everyday purchases have increased by over 25% since January 2020, according to the Consumer Price Index. This sustained inflation, coupled with elevated home prices and mortgage rates, is squeezing homeowners’ budgets.

The median sale price of a single-family home was December at $409,500, according to the National Association of Realtors. While down from a peak of $435,300 in June 2025, prices remain significantly above pre-pandemic levels. Home prices have jumped 54.5% between January 2020 and November 2025, as measured by the S&P CoreLogic Case-Shiller U.S. National Home Price Index.

Mortgage rates also play a critical role. A recent analysis by Realtor.com highlighted the magnitude of the affordability challenge. To return housing affordability to pre-pandemic levels – when mortgage payments consumed roughly 21% of median household income – one of three significant shifts would need to occur: mortgage rates would have to fall to approximately 2.65% from the current 6.16%; median household income would need to increase by 56% to $132,171 (from an estimated $84,763); or home prices would need to decline by 35% to a median of $273,000.

Despite the concerning trend, delinquency rates remain well below those seen during the 2008-2010 financial crisis. In the first quarter of 2010, 11.49% of outstanding home loans were delinquent, compared to 1.78% as of the third quarter of last year. However, experts caution against complacency.

“This is a considerably lower delinquency rate” than during the financial crisis, Bandebo said, “But it’s still a concerning sign that [delinquencies] are increasing.”

As of the third quarter of last year, Americans owed $13.07 trillion on 86.67 million mortgages, according to a LendingTree analysis of Federal Reserve Bank of New York data. Based on these figures and data from the Federal Reserve Bank of St. Louis, approximately 1.5 million mortgages could currently be classified as delinquent.

The increase in delinquencies has also had a subtle impact on credit scores. The average VantageScore credit score fell to 700 in December, a two-point decrease from a year earlier.

Financial advisors emphasize the importance of proactive financial planning for homeowners. Thomas Blackburn, a partner at Mason & Associates, advises potential homebuyers to avoid stretching their budgets to the maximum approved loan amount. “Their maximum is what they think you can bear, not what’s comfortable,” he said. “Leave room for the unknowns, for saving and for actually enjoying your life.”

A common rule of thumb is to limit housing costs – including mortgage payments, property taxes, and homeowners insurance – to no more than 28% of gross income. However, some advisors recommend an even lower threshold to provide a greater financial cushion.

Kate Feeney, a wealth advisor at Summit Place Financial Advisors, highlights the often-underestimated costs of home maintenance. “A simple rule of thumb is to set aside about 1% to 2% of the home’s value each year for repairs and upkeep,” she said. She also stresses the importance of maintaining an emergency fund covering three to six months of living expenses, particularly during the initial year of homeownership when unexpected costs are common.

Rising homeowners insurance premiums and property taxes further exacerbate the affordability challenges. Homeowners insurance rose approximately 6.5% in 2025 and has increased by 31.3% since January 2020, according to the Producer Price Index. Property taxes also generally increase over time as home values appreciate.

The current situation underscores the delicate balance facing homeowners and the broader housing market. While a widespread foreclosure crisis appears unlikely, the rising number of delinquencies serves as a stark reminder of the financial pressures facing many American households.