Are consumers’ balance sheets getting too stretched?
Aggregate U.S. household debt in the second quarter reached a new high, hitting $12.84 trillion. That total is $164 billion above the previous peak, which was set in the third quarter of 2008.
The Federal Reserve Bank of New York, which released the numbers in its Quarterly Report on Household Debt and Credit, said the increase over the first quarter was $114 billion, or 0.9%. Households took out more mortgage, auto, and credit card debt, with the last category rising the most, at 2.6%. On a year-over-year basis, consumer debt rose by $552 billion, and is now 15% above its trough in the second quarter of 2013.
Consumers are adding debt as the Federal Reserve is in a cycle of raising the federal funds rate, which pushes up the interest rates on some consumer loans. But so far, there is no clear sign that consumers are having trouble paying down their larger debt burdens.
The overall 90-day delinquency rate for household debt actually ticked downward slightly, to 3.3%, in the second quarter. However, there was a slight deterioration in the performance of credit card loans.
Credit-card balance flows into both early and serious delinquencies increased from a year ago — a persistent upward movement not seen since 2009, the New York Fed reported. For example, about 6.2% of credit card balances became 30 days delinquent during the quarter, an increase from 5.1% from one year ago.
Andrew Haughwout, senior vice president at the New York Fed, said credit-card delinquency flows climbed over the past year … “within the context of loosening credit standards, as borrowers with lower credit scores recover their ability to access credit cards.”
Haughwout added that “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.”
While early delinquency flows in other kinds of debt increased modestly or not at all, the data did show that auto and home lenders are also granting loans to less creditworthy customers. The median credit scores of both mortgage borrowers and auto loan borrowers fell slightly in the second quarter.
Mortgage balances, the largest component of household debt, stood at $8.69 trillion as of June 30, a $329 billion increase from a year ago. Balances on home equity lines of credit (HELOCs) actually fell year over year, by $26 billion.
The largest year-over-year increases in non-housing debt in the second quarter occurred in the auto loan ($87 billion) and student loan ($85 billion) categories.
The New York Fed’s report is based on data from its Consumer Credit Panel, a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data.