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Total household debt rises in Q2 2021, new credit extensions reach series highs

By on August 9, 2021 0

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August 9, 2021 – NEW YORK – The Center for Microeconomic Data at the Federal Reserve Bank of New York has released its quarterly report on household debt and credit. The report shows that total household debt increased by $ 313 billion (2.1%) to reach $ 14.96 trillion in the second quarter of 2021. The total debt balance is now $ 812 billion higher than the one at the end of 2019. The 2.1% increase in aggregate balances was the largest observed since the fourth quarter of 2013 and marked the largest nominal increase in debt balances since the second quarter of 2007. The report is based on data from the New York Fed Consumer Credit Panel, a nationally representative random sample of individual and household level debt and credit records drawn from anonymized Equifax credit data.

Mortgage balances, the largest component of household debt, rose $ 282 billion to $ 10.440 billion at the end of June. Credit card balances began to rise, increasing by $ 17 billion in the second quarter. Despite the increase, credit card balances were still $ 140 billion lower than they were at the end of 2019. Auto loans increased by $ 33 billion, while student loan balances increased. decreased by $ 14 billion. In total, non-home balances (including credit cards, car loans, student loans, and other debt) increased by $ 44 billion, with increasing car loans and credit card balances offsetting the increase. declining student loan balances.

New installment credit extensions hit series highs in the second quarter of 2021 for mortgages and auto loans. Mortgage constructs, which include mortgage refinancings, reached $ 1.2 trillion, beating volumes seen in the previous three quarters. Over the past four quarters, mortgage originations have reached an all-time high with nearly $ 4.6 trillion in mortgages issued. Auto loan arrangements, which include both loans and leases, reached $ 202 billion.

“We have seen a very strong pace of build-ups over the past four quarters with new credit extensions for mortgages and auto loans combined with a rebound in demand for credit card loans,” said Joelle Scally, administrator of the New York Fed’s Center for Microeconomic Data. “However, there are still two million mortgage forbearers who are vulnerable to financial hardship once the forbearance programs end.”

Overall default rates for all debt products have continued to decline since the onset of the pandemic recession, reflecting an enactment of forbearances both under the CARES Act and voluntarily offered by lenders. These supportive policy measures continue to be visible in delinquency transition rates, as the share of mortgages that have gone into delinquency has hit a record low of 0.4%. The share of mortgage balances over 90 days past due has fallen to an all-time low of 0.5% as forbearance remains an option and foreclosures are mostly on hold. At the end of June, the share of outstanding debt that was at a certain stage of delinquency was 2.0 percentage points lower than in the fourth quarter of 2019, just before the COVID pandemic hit states -United.

The share of student loans reported as past due remains very low, as the majority of federal student loans outstanding remain covered by the forbearances of the CARES Act. Transition rates for auto loans and delinquent credit cards also continued to decline, reflecting the impact of government stimulus packages and bank forbearance options for distressed borrowers.

The New York Fed also issued a Liberty Street Economy blog post that examines continued declines in the abstention rate with a focus on variation by state.

The report includes a one-page summary of key takeaways and their supporting data points. General trends in the report summary include:

Housing debt

  • There was $ 1.22 trillion in newly created mortgage debt in the second quarter of 2021, 71% of which was from borrowers with a credit score above 760.
  • Between April 1 and June 30, about 8,100 people had a new foreclosure rating added to their credit reports, by far the lowest number of foreclosures seen since the start of the data series in 1999, with foreclosures actually on hold due to the CARES Act and other restrictions.
  • The share of mortgage balances over 90 days past due has fallen to 0.5%, a historic low as forbearance remains an option and foreclosures are mostly on hold.

Student loans

  • Student loans outstanding stood at $ 1.57 trillion in the second quarter, down $ 14 billion from the first quarter of 2021.
  • About 5.7% of overall student debt was more than 90 days past due or in default in the second quarter of 2021. The lower level of past due student debt reflects a decision by the Department of Education to declare the state current loans eligible for abstentions from the CARES law.

Account closings, credit inquiries and collection accounts

  • The number of credit inquiries in the past six months – an indicator of consumer credit demand – rose to $ 121 million, an increase of 3.7% from the previous quarter, after have declined since the second quarter of 2020.
  • 206 million new accounts were opened in the second quarter, a jump after moderate account openings since the start of the pandemic.

Evolution of household debt and credit in Q2 2021

CATEGORY QUARTERLY CHANGE * (BILLION $) ANNUAL CHANGE **
($ BILLION)
TOTAL IN Q2 2021 ($ TRIILLIONS)
MORTGAGE DEBT (+) $ 282 (+) $ 666 $ 10.44
HOME EQUITY CREDIT LINE (-) $ 13 (-) $ 53 $ 0.32
STUDENT DEBT (-) $ 14 (+) $ 33 $ 1.57
AUTOMATIC DEBT (+) $ 33 (+) $ 72 $ 1.42
CREDIT CARD DEBT (+) $ 17 (-) $ 30 $ 0.79
OTHER (+) $ 8 $ 3 $ 0.42
TOTAL DEBT (+) $ 313 (+) $ 691 $ 14.96

* Change from Q1 2021 to Q2 2021
** Change from Q2 2020 to Q2 2021

Flow in serious delinquency (90 days or more delinquent)

CATEGORY Q2 2020 Q2 2021
MORTGAGE DEBT 1.1% 0.3%
HOME EQUITY CREDIT LINE 0.8% 0.4%
STUDENT LOAN DEBT 6.5% 1.0%
AUTOMOTIVE DEBT 2.3% 1.6%
CREDIT CARD DEBT 5.1% 3.4%
OTHER 4.6% 2.9%
ALL 2.1% 0.8%

About the report

The Federal Reserve Bank of New York’s Household Debt and Credit Report provides unique data and information on the credit conditions and activity of U.S. consumers. Based on data from the New York Fed’s Consumer Credit Panel, a nationally representative sample drawn from anonymized credit data from Equifax, the report provides a quarterly overview of household borrowing trends and debt, including data on mortgages, student loans, credit cards, auto loans. and delinquencies. The report aims to help community groups, small businesses, state and local governments, and the public better understand, monitor and respond to borrowing and indebtedness trends at the household level. Sections of the report are presented as interactive charts on the New York Fed’s Household Debt and Credit Report webpage, and the full report is available for download.

1 The rates represent the annualized shares of balances going into delinquency. The flow to serious delinquency is calculated as balances that were recently at least 90 days late in the reference quarter divided by balances that were less than 90 days past due in the previous quarter.
Source: Federal Reserve Bank of New York


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