Aggregate household debt topped $16 trillion for the first time during the second quarter of this year as high inflation caused mortgage and auto balances to grow, according to the Federal Reserve Bank of New York’s quarterly report on household debt and credit.
Mortgage balances on consumer credit reports increased by $207 billion, reaching $11.39 trillion by the end of June. Mortgage originations slightly decreased in the second quarter to $758 billion. Credit card balances jumped $46 billion, the largest such jump in 23 years. Credit card balances remain a little below pre-pandemic levels after the infusion of cash into both business and consumer accounts lessened credit needs.
Balances on retail cards and other consumer loans increased by $25 billion. Non-housing credit card balances grew by $103 billion or 2.4 percent from the first quarter. Aggregate limits on credit cards were increased by $100 billion in the second quarter to $4.22 trillion, the largest jump in more than a decade.
According to the U.S. Bureau of Labor Statistics, year-over-year consumer prices were up 9.1 percent in June, the largest increase of its kind since November 1981. “The second quarter of 2022 showed robust increases in mortgage, auto loan, and credit card balances, driven in part by rising prices,” said Joelle Scally, administrator of the Center for Microeconomic Data at the New York Fed.
Delinquency rates remained very low in the second quarter. As of June, less than 3 percent of outstanding debt was in delinquency, a 2-percentage-point drop from 2019.
After years of declines, balances on home equity lines of credit increased by $2 billion to $319 billion. There was $758 billion in newly originated mortgage debt in the second quarter, with 65 percent originating from borrowers with credit scores above 760.
“The second quarter of 2022 showed robust increases in mortgage, auto loan, and credit card balances, driven in part by rising prices,” Scally said. “While household balance sheets overall appear to be in a strong position, we are seeing rising delinquencies among subprime and low-income borrowers with rates approaching pre-pandemic levels.”
A Liberty Street Economics blog post accompanying the report noted that despite rising debt, “households in general have weathered the pandemic remarkably well, due in no small part to the expensive programs put in place to support them.
“Further, household debt is held overwhelmingly by higher-score borrowers, even more so now than in the history of our data,” the Fed stated.