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Households added to their debt at the fastest pace in 15 years in the third quarter as credit card usage and mortgage balances surged, the Federal Reserve reported Tuesday.
Total debt soared by $351 billion in the July-September period, the largest nominal quarterly increase since 2007, and IOUs across US households hit a new record of $16.5 trillion. This is an increase of 2.2% from the previous quarter and an increase of 8.3% from a year ago.
The increase represents an annual increase of $1.27 trillion, following a surge of $310 billion in the second quarter.
Debt has surged over the past year as inflation approaches its highest pace in more than 40 years, rising interest rates and strong consumer demand.
The biggest contributors to this debt burden are mortgage balances, up $1 trillion from a year ago to $11.7 trillion, and credit card debt, which rose to $930 billion.
In total, credit card balances have increased more than 15% since the same period in 2021, the largest annual growth in more than 20 years, according to the New York Fed, which released the report. A group of Fed researchers said in a blog post on the central bank’s website that the increase “exceeds the data of the last 18 years.”
“Credit card, mortgage and auto loan balances continued to rise in the third quarter of 2022, reflecting strong consumer demand and rising prices,” said Dong-Hung Lee, an economic research adviser at the Federal Reserve Bank of New York. But with interest rates rising, new mortgage originations have slowed to pre-pandemic levels.”
New York Fed researchers attribute credit card growth to “very strong” spending, rising prices, and consumers using significant levels of savings remaining in their accounts.
As the balance increases, the delinquencies also increase.
However, “delinquency rates are rising but remain low by historical standards, suggesting that consumers are managing their finances through periods of rising prices,” the researchers wrote. ing.
Elsewhere in the report, the Federal Reserve said auto loan balances rose slightly to $1.52 trillion, while student loan debt fell slightly to $1.57 trillion. I’m here. Student loan debt is at its lowest level since the second quarter of 2021, amid lengthy moratoriums and efforts by the Biden administration to forgive some of its student loan debt.
Auto loan liabilities rose only marginally on a quarterly basis, but were up 5.6% from a year ago.
Mortgage balances continue to rise amid a sharp rise in interest rates with 30-year mortgage rates hovering around 7%. Despite a sharp decline in originations, total debt increased, dropping nearly 17% to $633 billion.
Foreclosures remained low even as the pandemic-related moratorium expired. The student loan delinquency rate remained at about 4%.
