US household debt surged US$460 billion last year, the biggest increase in 10 years, and has nearly returned to the peak level seen before the global financial crisis, the New York Federal Reserve said on Thursday.
However, the increase has been driven by student debt and auto loans, rather than by the mortgages that were central to the 2008 crisis, and delinquency rates are less than half of what they were in the peak period, despite worrying trends in auto and student loans, the New York Fed said in its latest quarterly household debt and credit report.
At US$12.58 trillion at the end of last year, total household debt is less than 1 percent below the peak in the third quarter of 2008, just before the financial crisis erupted.
Share of credit that is delinquent was 3.3 percent at the end of the year, well below the 8.5 percent of late 2008, while debt considered seriously delinquent, defined as being 90 days or more past due, was down to 3.3 percent from 5.1 percent.
“Debt held by Americans is approaching its previous peak, yet its composition today is vastly different as the growth in balances has been driven by non-housing debt,” New York Fed senior vice president Wilbert van der Klaauw said.
Since reaching a post-crisis low in mid-2013, “the rebound in household debt has been led by student debt and auto debt, with only sluggish growth in mortgage debt,” the New York Fed said.
Home mortgages still comprise about three-fourths of total household debt, and rose US$231 billion last year, but the serious delinquency rate held steady at 1.6 percent in the second half of last year.
Auto loan balances continued their rise and loan originations for last year reached a new annual record in the 18-year history of the data, jumping US$93 billion.
Student loan balances jumped US$78 billion last year and have risen in every year for the past 18 years, but in a troubling trend, the serious delinquency rate is now more than 11 percent, compared with 8 percent in late 2008.