Mortgage Delinquencies Rise: Unemployment & Falling Home Prices Linked to Q4 Increase

Mortgage delinquencies rose in the final quarter of 2025, with the increase particularly pronounced among homeowners in lower-income areas, according to data released Tuesday by the Federal Reserve Bank of New York.

The share of borrowers more than 90 days late on their mortgage payments jumped from roughly 0.5% in 2021 to 3% by the end of 2025 for those in the lowest-income zip codes, the New York Fed reported. Borrowers in higher-income areas experienced delinquency rates below 1% during the same period. Delinquencies also increased in middle-income zip codes, though not as sharply.

The rise in delinquencies coincides with a period of increasing unemployment and, in some regions, declining home prices. The national unemployment rate has risen approximately one percentage point since April 2023. Two-thirds of U.S. Counties saw unemployment rates increase, with rates in Florida and Minnesota climbing more than 1.6 percentage points. Counties experiencing the largest increases in unemployment saw mortgage delinquencies worsen by nearly 0.6 percentage points year-over-year, while counties with stable or declining unemployment saw a more modest increase of 0.2 percentage points.

Federal Reserve researchers noted the trend was particularly evident among Federal Housing Administration (FHA) mortgages. “These delinquency rates and the increases are highly concentrated in low income areas and also areas where home prices have been falling,” a New York Fed researcher said on a conference call Tuesday.

While overall serious delinquency rates remain historically low – at 1.3% in 2025, compared to over 8% during the 2007-09 recession – the increase represents a shift from the artificially low rates experienced during the pandemic, when government stimulus and bank relief programs were widespread.

Aggregate household debt increased by $191 billion in the fourth quarter, reaching $18.8 trillion, a 32.4% increase since the end of 2019. Mortgage balances grew by $98 billion to $13.2 trillion, while credit card debt rose by $44 billion to $1.28 trillion. Home equity lines of credit (HELOCs) also increased by $12 billion, continuing a trend that began in 2022 after a long period of decline since 2009.

Home prices were up 1.4% nationally in November, according to the S&P CoreLogic Case-Shiller national home price index, but regional variations persist, with areas along the Gulf Coast of Florida experiencing price declines and corresponding increases in mortgage delinquencies.