The Federal Reserve Bank of New York’s Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit, which reported that total household debt increased by $193 billion (1.5%) to $13.15 trillion in the fourth quarter of 2017. This report marks the fifth consecutive year of positive annual household debt growth. There were increases in mortgage, student, auto, and credit card debt (increasing by 1.6%, 1.5%, 0.7% and 3.2% respectively) and another modest decline in home equity line of credit (HELOC) balances (decreasing by 0.9%).
Outstanding consumer debt balances by type: $8.88 trillion (mortgage), $1.38 trillion (student loans), $1.22 trillion (auto), $834 billion (credit card), $444 (HELOC).
Mortgages are the largest form of household debt and their increase of $139 billion was the most substantial increase seen in several quarters. Unlike overall debt balances, which last year surpassed their previous peak reached in the third quarter of 2008, mortgage balances remain 4.4% below it. The New York Fed issued an accompanying blog post to examine the regional differences in mortgage debt growth since the previous peak.
As of December 31, 4.7% of outstanding debt was in some stage of delinquency. As the chart shows mortgage and credit card debt delinquency rates have decreased sharply since 2010. Student loan debt delinquency rates have increased substantially during the same period (and delinquency rates for student loans are likely to understate effective delinquency rates because about half of these loans are currently in deferment, in grace periods or in forbearance and therefore temporarily not in the repayment cycle. This implies that among loans in the repayment cycle delinquency rates are roughly twice as high). You can understand why many see student debt as a huge economic problem the economy is facing in the coming years.
Of the $619 billion of debt that is delinquent, $406 billion is seriously delinquent (at least 90 days late or “severely derogatory”). The flow into 90+ days delinquency for credit card balances has been increasing notably from the last year and the flow into 90+ days delinquency for auto loan balances has been slowly increasing since 2012.
“Despite recovered house prices, mortgage balances remain far below their previous peaks in the states that were hardest-hit by the Great Recession,” said Donghoon Lee, Research Officer at the New York Fed. “While the subdued mortgage balance levels of these areas should not necessarily be interpreted as a negative outcome, the regional differences clearly show that the echoes of the financial crisis still linger.”
Overarching trends from the Report’s summary include:
- Mortgage balances increased substantially, and the median credit score of borrowers for new mortgages decreased slightly.
- The share of mortgage balances that were 90 or more days delinquent (“seriously delinquent”) continued to improve. Notably, the share of mortgages in early delinquency that “cured” by becoming current on the debt improved to 35.9%, from 30.9% in the third quarter.
- Auto loan balances continued their steady rise seen since 2011. Although originations decreased slightly in the quarter, 2017 had the highest annual auto loan origination volume observed in the New York Fed data.
- Credit card balances increased and flows into serious delinquency have increased since the third quarter of 2016.
- Outstanding student loan balances increased. Student loan delinquency flows declined slightly but remain at a high level.
Bankruptcies & Foreclosures
- Bankruptcy notations decreased for the second consecutive quarter.
- Foreclosure notations remained essentially unchanged at the lowest levels observed in the New York Fed’s data.
See the full FED Household Debt and Credit report.
Related: Delinquencies on Consumer Closed-end Installment Loans Fall to Record Low (2016) – Default Rates on Loans by Credit Score – Consumer and Real Estate Loan Delinquency Rates from 2001 to 2011 in the USA