The leap in the unemployment rate to 8.1% in February is expected to have an outsized negative impact on loans made to consumers and businesses.

As the unemployment rate treks higher - expected to hit 9% by year end and 10% next year - auto, credit card, home and commercial real estate loans are expected to see a corresponding spike in delinquencies and defaults.

That could add unwelcome pressure to already fragile markets and undo efforts by regulators to stimulate consumer lending to get the economy back on its feet. Consumer spending accounts for 70% of the U.S. economy.

Unemployment and higher default rates "move in tandem," said Mike Dean, managing director and head of consumer asset-backed securities at Fitch Ratings.

"We expect record delinquencies to continue for the foreseeable future on consumer loans as the consumer's credit quality worsens," he added.

Currently, the 60-day delinquencies on credit card loans is nearly 4%, up from the low 3% range it held at last spring.

"A lot of times, credit card performance variables are a leading indicator reflecting the strain and stresses on the consumer in the economic cycles," Dean said.

Similarly, chargeoff rates on cards - loans that have been written off as uncollectable - have shot up to 7.5%, and are expected to hit 9% by year end.

The rapid rise in the unemployment rate is the cause of this unexpected turn south in the finances of consumers. The unemployment rate has increased 3.30 percentage points from the year-ago level, its largest year-on-year increase since June 1975. And, at 8.1%, it is back at December 1983 levels.

Job losses combined with falling home prices and a decline in availability of loans to consumers have left those who have lost their job with few options. Typically, borrowers try to sell their home to make ends meet when unemployed, but given current market conditions, that is not a feasible option.

If unemployment rises to 9%, Fitch expects a 20% increase in credit card charge-offs and a 24% increase in auto loan cumulative net losses.

Similarly, Barclays estimates a 35% increase in mortgage losses for every percentage point increase in unemployment levels.

The rising tide of joblessness already has dragged homeowners with good credit into the quagmire of delinquencies and foreclosures. Mortgage finance giants Fannie Mae (FNM) and Freddie Mac (FRE) have reported a sharp spurt in delinquency rates on prime mortgages they guarantee in the last couple of months to record levels of 2%, a nearly 1.50 percentage point jump.

Policy makers are trying to stem the wave of defaults and foreclosures. The Obama administration's massive stimulus program includes a plan to help struggling home owners, while the Federal Reserve is seeking to keep mortgage rates low by buying up mortgage-backed securities. And Treasury and the Fed this week launched their latest facility - the Term Asset-Backed Lending Facility - which is aimed at supporting consumer lending.

The drop in consumer spending also has a widespread impact on the fate of commercial properties, Fitch said. Retail stores are closing at a fast pace, multifamily rentals are losing tenants, and hotels are reporting almost a one-fourth drop in room occupancy rates from the peak.

Fitch says states with higher unemployment rates tend to have a higher default rate on loans underlying commercial mortgage-backed securities.

For instance, multifamily loans in these states have a default rate of 4.1%, retail loans 1.2%, and office loans 0.65%. All of this is about 40% to 50% more than the current national averages.

-By Prabha Natarajan, Dow Jones Newswires; 201-938-5071; prabha.natarajan@dowjones.com