- The Federal Reserve reported a modest uptick in delinquency rates across consumer, commercial, and residential real estate loans in 2025, while overall loan growth stayed steady.
- Banks remain well-capitalized and the system is considered stable, but the Fed warned of emerging risks in private credit markets following several nonbank defaults.
- Auto and credit card delinquencies rose in the second half of 2025 but ended the year below 2024 levels.
The Federal Reserve on Thursday released its annual review of loan performance, revealing a modest increase in delinquencies across key lending categories. Consumer, commercial, and residential real estate loans all showed slight deterioration, though overall loan growth remained steady throughout the year.
Despite the uptick, the Fed emphasized that banks are well-capitalized and the banking system is stable. “The banking sector remains resilient, with strong capital and liquidity positions,” a Fed official said, speaking on condition of anonymity.
The report flagged rising risks in the private credit market, where several nonbank lenders have defaulted. “The nonbank sector warrants close monitoring,” the official added.
Auto and credit card delinquencies increased in the second half of 2025, but ended the year below 2024 levels, suggesting stress may be contained.
Analysts say the combination of stable bank lending and rising nonbank defaults points to a two-tier credit system. “Traditional banks are in good shape, but private credit could be a source of contagion,” said one credit strategist.
The Fed’s assessment comes as regulators increasingly scrutinize nonbank lending. Without intervention, some experts warn, private market stress could spill over into broader financial conditions.
Correction: An earlier version of this article misstated the year-over-year comparison for auto delinquencies. They ended 2025 below 2024 levels, not above.