The ability of U.S. households to cover an unexpected $2,000 expense is at the lowest level in a decade, the Federal Reserve Bank of New York said.
RELATED: First-time home buyer income hits record high
Only 65.8% of surveyed households said they would be able to come up with $2,000 if an unexpected need arose within the next month, according to the NY Fed's latest survey of consumer expectations and credit access, which is conducted every four months. That's the lowest since the series began in 2013, the New York Fed said. In 2022, the average reading was 67.5%.
Consumers age 40 and younger reported the lowest likelihood that they could come up with a hypothetical $2,000. About 58% of that age group said they could manage it, down 10 percentage points from 2020.
The New York Fed's findings show how the pandemic-era surge in the cost of living is squeezing consumer credit.
The share of card-holders seeking an increase in their credit limits jumped to 17.8% last month, compared to 11.2% a year earlier 2022. The increase was largest among those with credit scores that are well below the US average.
Meanwhile, lenders were more apt to reject would-be borrowers.
"Reported average rejection rates for credit cards, auto loan, and mortgage loan refinance applications in 2023 exceeded those in 2022," the New York Fed said.
About one-in-five credit card applications were rejected this year, and the average rejection rate on mortgage refinance applications increased to 15.5%, from 9.9% in 2022.
Meanwhile better-off American households are turning away from loans that have gotten expensive after the Fed hiked interest rates.
The share of respondents who said they're likely to apply for at least one type of credit over the next 12 months fell to 25.1% last month, from 28% a year earlier. The decrease was driven mostly by those with good credit ratings (scores between 680 and 760), and by respondents age 60 and older.
