Mortgages, Cars, Credit Cards Drive Household Debt Higher

US household debt has surged more than 15% in just four years.

US aggregate household debt balances increased for the 12th consecutive quarter in Q2 to $12.84 trillion, a $114 billion (0.9%) increase from Q1, according to The Federal Reserve Bank of New York. Household debt is now 15.1% above what it was just four years ago.

According to the bank’s Quarterly Report on Household Debt and Credit, mortgage, auto, and credit card debt rose 0.7%, 2%, and 2.6%, respectively. There was no change to student loan debt, and a 0.9% decline in balances on home equity lines of credit.

The report uses data from the New York Fed’s Consumer Credit Panel, a nationally representative sample of individual and household debt, and credit records drawn from anonymized Equifax credit data.

Mortgage balances, which make up the largest component of household debt, rose $64 billion from Q1 to $8.69 trillion as of June 30. Balances on home equity lines of credit were relatively unchanged at $452 billion, while non-housing balances were up in Q2. Meanwhile auto loans grew by $23 billion, and credit card balances increased by $20 billion.

The report said the rise in credit card balances is part of a persistent upward movement not seen since 2009.

“While relatively low, credit card delinquency flows climbed notably over the past year,” said Andrew Haughwout, senior vice president at the New York Fed. “The current state of credit card delinquency flows can be an early indicator of future trends, and we will closely monitor the degree to which this uptick is predictive of further consumer distress.”

Economists at the Federal Reserve Bank of New York said there were aspects of the household balance sheet that warrant close monitoring, such as a moderate rise in the number of credit cards issued to nonprime borrowers (credit score below 660), as well as an uptick in delinquency transitions for credit card balances.

Some of the major trends cited in the report include:

  • Housing Debt. Mortgage balances increased, originations declined, and the median credit scores of borrowers for new mortgages declined slightly. Mortgage delinquencies improved, while foreclosure notations decreased and remained low by historical standards.
  • Non-Housing Debt. Auto loan balances continued their steady rise from 2011, with an increase in auto loan originations. Median credit scores of borrowers for these new loans declined slightly. Credit card balances increased and the credit card serious delinquency rate remained flat. Outstanding student loan balances were flat, however, Q2 typically has slow or no growth in student loan balances due to the academic cycle.
  • Bankruptcies & Delinquencies. Aggregate delinquency rates were roughly flat again. Bankruptcy notations increased and were approximately the same as the levels seen in Q2 2016. Although low by historical standards, early delinquency flows diminished, with student loans, auto loans, and mortgages seeing moderate increases. Meanwhile, credit card debt transitioning into early and serious delinquencies rose sharply from a year ago.

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