Report: Household debt increases slightly in first quarter

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Household debt increased by $85 billion, or less than 1 percent, to $14.64 trillion in the first quarter of 2021, according to the Federal Reserve Bank of New York’s Center for Microeconomic Dataʻs Quarterly Report on Household Debt and Credit.

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The report found that while mortgage, auto loan, and student loan balances have all increased. Mortgage balances, the largest component of household debt, jumped by $117 billion in the first quarter and stood at $10.16 trillion. Auto loans increased in the first quarter by $8 billion, while student loan balances increased by $29 billion.

Credit card balances, on the other hand, declined by $49 billion in the first quarter. It was the second-largest quarterly decline in card balances since the NY Fed started tracking this data in 1999. Credit card balances are $157 billion lower than they had been at the end of 2019.

Overall, the total debt balance is now $344 billion higher than the year prior.

Also, new extensions of credit were strong for both mortgages and auto loans. Mortgage originations, which include mortgage refinances, reached $1.1 trillion, only slightly below the record high seen in the fourth quarter of 2020. Auto loan originations, which include both loans and leases, edged down slightly but remain high at $153 billion. Only 15 percent of the $153 billion of newly originated auto loans were originated to borrowers with credit scores below 620. That is the lowest share seen in the history of the data.

“2021 began with a strong increase in new extensions of mortgage and auto loan credit coupled with a substantial drop in credit card balances,” Andrew Haughwout, senior vice president at the New York Fed, said. “However, surging retail sales volumes suggest that a combination of stimulus checks, increased consumer confidence, and pent-up demand are both supporting consumption and also helping borrowers reduce revolving debt balances.”

Aggregate delinquency rates across the board have continued to decline since the beginning of the pandemic recession. At the end of March, the share of outstanding debt that was in some stage of delinquency was 1.5 percentage points lower than the rate observed in the first quarter of 2020. Further, about 114,000 consumers had a bankruptcy notation added to their credit reports, a decline from the previous quarter and a new historical low.

In addition, the share of student loans that are delinquent remains low, while auto loans and credit card delinquency transition rates also continued to decline. These declines reflect the impact of government stimulus programs and bank-offered forbearance options for troubled borrowers.

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