US household debt hits $17.5 trillion in the fourth quarter of 2023
Homeowners are increasingly tapping into their home equity instead of refinancing, given the current high mortgage-rate environment, according to data from the Federal Reserve Bank of New York.
Overall household debt surged by $212 billion in the fourth quarter of 2023 to $17.5 trillion, with mortgage debt and credit cards accounting for the majority of this increase.
Over the last two years, more borrowers have turned to home equity lines of credit (HELOC), with an $11 billion jump in HELOC balances, as a means to leverage existing equity without having to refinance at higher rates.
Mortgage debt, which is the largest chunk of household debt, reached a new high of $12.25 trillion at the end of December. Credit card balances surged to $1.13 trillion and auto loans to $1.61 trillion in the fourth quarter, both setting records since data collection began in 2003. Interestingly, student loan amounts remained relatively stable at $1.60 trillion, likely due to temporary forbearance measures.
Delinquency rates for credit card and auto loans have surpassed their pre-pandemic benchmarks. The bank’s latest findings highlight an 8.5% delinquency rate for credit card balances and a 7.7% rate for auto loans in the last quarter. Mortgage delinquencies also climbed to 0.82%, while HELOC delinquencies were down to 45%.
Read more: Mortgage forbearance usage wanes, reflecting economic recovery
Wilbert van der Klaauw, an economic research advisor at the New York Fed, commented, “Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels. This signals increased financial stress, especially among younger and lower-income households.”
The report also revealed that consumers in their 30s are particularly vulnerable to delinquencies, likely burdened by credit card debts and student loans. Yet, the full impact of student loan delinquencies is yet to emerge, as missed payments are currently shielded from credit bureau reports under a leniency initiative from President Biden’s administration—a situation that is expected to change later in the year.
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