• What's at Stake: Lenders risk sudden delinquency spikes if they fail to engage a specific borrower demographic.
• Supporting Data: Lenders face the risk of compounding debt, with 14% of Americans, including 23% of Gen Z and 21% of millennials, still paying off holiday debt from last year.Overview bullets generated by AI with editorial review.

Servicers need to keep an eye on young borrowers over the holiday season, as many are prioritizing other purchases over their mortgage payments.Nearly half of Gen Z borrowers have delayed or skipped a rent or mortgage payment to afford holiday spending, according to a new survey conducted by Accredited Debt Relief. This compares to 28% of millennials, 14% of Gen X and 3% of baby boomers.

Lenders should anticipate localized spikes in delinquencies over the next few months and adjust their risk models to include seasonal behavioral factors for borrowers under 40. Servicers should also reach out to younger borrowers now to discuss payment priorities, as opposed to waiting for missed payments in January.

Additionally, if borrowers are planning to miss payments anyways, lenders can take advantage by offering forbearance or deferment options to remain in good standing with the eligible borrowers and prevent loans from entering delinquency status.

Lenders face the risk of compounding debt as well, with 14% of Americans, including 23% of Gen Z and 21% of millennials, still paying off holiday debt from last year. Nearly half of respondents have already taken on or expect to take on holiday debt this year. Two-thirds of Gen Z reported actual or anticipated holiday debt, compared with 55% of millennials and 28% of baby boomers, according to the survey.

"Holiday spending should never come at the expense of someone's financial stability, but these findings show just how difficult it can be to balance financial responsibilities with the social expectations and pressure to create a memorable holiday," said Bobbi Rebell, chief financial education advisor at Accredited Debt Relief, in a press release Tuesday. 

What else are Americans cutting back on?

The survey of 2,000 adults in the United States who celebrate a winter holiday revealed 19% are spending less on groceries and everyday necessities to make room for their holiday budget, followed by paying down debt at 14%, savings contributions at 14%, monthly bills at 11% and healthcare at 7%.

Beyond reducing expenses, 35% of respondents said they were pulling money from their savings for the holidays. Another 20% reported reducing retirement contributions, the survey found.

The additional cost of the holidays can be particularly challenging for households already struggling with payments. More than 30% said the added costs can push them from a barely stable financial position into a financial danger zone, while 27% said holiday spending negatively affects their mental health, according to the report.

"One of the biggest holiday budgeting mistakes is focusing on the gifts while overlooking everything else that comes with the season," Rebell said. "Shipping, decorations, entertaining and last-minute purchases can add up quickly. And when those expenses go on a credit card without a clear repayment plan, the financial consequences can last long after the holidays are over."