The data: Strained consumer budgets are reflected in mortgage delinquencies, which worsened in every stage of repayment and every borrower class, according to VantageScore’s January 2026 CreditGauge.

Mortgage delinquencies overall increased 30.9% YoY for early-stage payments, 9.06% for mid-stage, and 14.6% for late-stage.

Zoom out: According to an Ipsos survey commissioned by Redfin, 49% of US residents struggle to afford their rent or mortgage payments. This includes 67% of Gen Zers, 53% of millennials, 54% of Gen Xers, and 36% of baby boomers. Gen Zers are cutting costs to cope: taking fewer or no vacations, eating out less, selling belongings, skipping meals, and working a side hustle.

The rising cost of living as well as income volatility leave consumers with little margin for error, increasing the likelihood of missed payments, overdrafts, and churn. Consumers saved 22.8% of their income in the last six months, decreasing to only 13.5% among employed consumers who live paycheck to paycheck.

Implications for banks: Financial institutions (FIs) need to invest effectively in customers’ financial wellness. According to our February 2026 report Financial Wellness Apps and Tools, rising financial stress is exposing gaps in banks’ money management tools. How banks respond will shape crucial parts of the customer experience.

Strategically, FIs should design digital journeys that help consumers mitigate financial events like job loss, major medical expenses, or an income gap. In practice, FIs should help customers manage their cash flow and safeguard them from overdraft fees. Institutions should consolidate financial wellness tools into their apps by making intelligent cash flow insights and bill management integral features.