Household Debt Surpasses its Peak Reached During the Recession in 2008
Debt Composition and Performance Today Look Vastly Different; More Debt is Non-Housing Debt and Delinquencies Are Considerably Lower, Though Rising
May 17, 2017
NEW YORK – The Federal Reserve Bank of New York today issued its Quarterly Report on Household Debt and Credit, which reported that total household debt reached $12.73 trillion in the first quarter of 2017 and finally surpassed its $12.68 trillion peak reached during the recession in 2008. This marked a $149 billion (1.2%) quarterly increase and nearly three years of continued growth since the long period of deleveraging following the Great Recession. Of note, the Report includes two new charts focused on transitions into early and serious delinquency, broken out by debt type.1 The Report is based on data from the New York Fed’s Consumer Credit Panel, a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data.
The New York Fed also issued an accompanying blog post, which uses the report’s new charts to assess how trends of transitions into delinquency have evolved. The blog post also explains that, although debt has reached record heights, this number is in nominal terms and it took an unusually long time from a historical perspective for debt to reach the 2008 level again.
“Almost nine years later, household debt has finally exceeded its 2008 peak but the debt and its borrowers look quite different today. This record debt level is neither a reason to celebrate nor a cause for alarm. But it does provide an opportune moment to consider debt performance,” said Donghoon Lee, Research Officer at the New York Fed. “While most delinquency flows have improved markedly since the Great Recession and remain low overall, there are divergent trends among debt types. Auto loan and credit card delinquency flows are now trending upwards, and those for student loans remain stubbornly high.”
The Report includes a one-page summary of key takeaways and their supporting data points. Overarching trends from the Report’s summary include:
- Mortgage balances increased again while originations declined and median credit scores of borrowers for new mortgages increased, reflecting tightening underwriting.
- Mortgage delinquencies worsened slightly and foreclosure notations increased but remained low by historical standards.
- Auto loan balances continued their steady rise seen since 2011 while auto loan originations declined and median credit scores of borrowers for these new loans increased.
- Credit card balances declined, delinquencies increased and the aggregate credit card limit increased for the 17th consecutive quarter.
- Student loan balances increased – marking an increase in every year throughout the 18-year history of this series.
Bankruptcies & Delinquencies Overall
- Aggregate delinquency rates were roughly flat.
- Bankruptcy notations reached another low the 18-year history of this series.
- This quarter saw a notable uptick in credit card debt transitioning into delinquencies, a continued upward trend of auto loans transitioning into serious delinquencies, and student loan transitions into serious delinquencies remaining high.
Household Debt and Credit Developments as of Q1 2017
|CATEGORY||QUARTERLY CHANGE*||ANNUAL CHANGE**||TOTAL AS OF Q1 2017|
|MORTGAGE DEBT||(+) $147 BILLION||(+) $258 BILLION||$8.63 TRILLION|
|HOME EQUITY LINE OF CREDIT||(-) $17 BILLION||(-) $29 BILLION||$456 BILLION|
|STUDENT LOAN DEBT||(+) $34 BILLION||(+) $83 BILLION||$1.34 TRILLION|
|AUTO LOAN DEBT||(+) $10 BILLION||(+) $96 BILLION||$1.17 TRILLION|
|CREDIT CARD DEBT||(-) $15 BILLION||(+) $52 BILLION||$764 BILLION|
|TOTAL DEBT||(+) $149 BILLION||(+) $473 BILLION||$12.73 TRILLION|
*Change from Q4 2016 to Q1 2017
**Change from Q1 2016 to Q1 2017
90+ day delinquency rates (known as “seriously delinquent”)
|CATEGORY2||Q4 2016||Q1 2017|
|HOME EQUITY LINE OF CREDIT||2.1%||2.1%|
|STUDENT LOAN DEBT 3||11.2%||11.0%|
|AUTO LOAN DEBT||3.8%||3.8%|
|CREDIT CARD DEBT||7.1%||7.5%|
1Delinquency rates are computed as the proportion of the total outstanding debt balance that is at least 90 days past due.
2As explained in a previous report, 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.
3As explained in a previous report, 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.
About the Report
The Federal Reserve Bank of New York’s Household Debt and CreditReport provides unique data and insight into 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 Equifax credit data, the report provides a quarterly snapshot of household trends in borrowing and indebtedness, including data about 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 to better understand, monitor and respond to trends in borrowing and indebtedness at the household level. Sections of the report are presented as interactive graphs on the New York Fed’s Household Credit web page and the full report is available for download.