Increases in mortgage and credit card balances drove aggregate household debt balances up by nearly 2 percent in the third quarter to nearly $15.25 trillion, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit.
Those balances are $1.1 trillion higher than at the end of 2019 and $890 billion more than in the third quarter of 2020. It’s also $2.57 trillion more than the previous peak of $12.68 trillion in 2008, according to the report. Those increases came as enhanced government stimulus checks ended and the U.S. economy continued reopening after shuttering due to the pandemic. The pace of newly issued credit declined during the first months of the pandemic, especially for borrowers with credit scores below 620. That trend reversed during the fall of 2020, according to the report, when issuance to borrowers of all scores met, even sometimes surpassing, pre-pandemic levels.
Aggregate credit card limits increased by $88 billion to $3.96 trillion in the third quarter, reversing the decline during the first three quarters of the pandemic recession. Of the $412 billion in delinquent debt, $302 billion was at least 90 days late, including debt removed from lenders’ books but upon which they continued to attempt collection. Delinquency rates by product continued to decline, and across-the-board decreases were seen in new transitions into delinquency. Mortgage balances shown on consumer credit reports increased by $230 billion in the third quarter to $10.67 trillion at the end of September, according to the Fed. Credit card balances increased by $17 billion in the third quarter but remain $123 billion lower than at the end of 2019.
Credit card balances usually see modest increases in the second and third quarters before increasing even more in the fourth quarter as holiday spending spikes, according to the Federal Reserve Bank of New York. Those balances are sharply reduced in the first quarter of most years as borrowers pay off their holiday spending.
Temporary increases in closed credit card accounts and closures along with the reduced number of issuances led to a decline in the number of overall accounts in the third quarter, according to the report. “When banks reduced risks in the early part of the pandemic, they reduced exposures by pausing the issuance of new cards and closing some existing accounts,” the report said. “Monthly credit report data reveal that the irregularities in credit card accounts and use were fleeting outcomes reflecting the intense early months of the pandemic recession and the most recent data suggest a return to normal trends, albeit from lower levels.”