A “For Sale” sign outside a home in Albany, California, United States, on Tuesday, May 31, 2022. Homebuyers are facing a worsening affordability situation with Mortgage rates hovered at their highest levels in more than a decade.
Joe Raedle | Bloomberg | beautiful pictures
Household debt topped $16 trillion in the second quarter for the first time, as soaring inflation pushed up home and auto balances, the New York Federal Reserve reported on Tuesday.
America’s collective IOUs totaled $16.15 trillion through the end of June, good with an increase of $312 billion – or 2% – from the previous quarter. Debt surges are common, but with particular focus on mortgages and car purchases.
“Americans are borrowing more, but a large portion of the increase in borrowing is due to higher prices,” the New York Fed said in a blog post accompanying the announcement.
Mortgage balances rose 1.9 percent in the quarter, or $207 billion, to about $11.4 trillion, even as the starting pace slowed. That year-over-year increase marks a 9.1% increase from a year before home prices exploded during the pandemic.
Credit card balances grew by $46 billion over a three-month period and 13% over the past year, which Fed researchers say is the biggest increase in more than 20 years. Non-residential credit outstanding increased 2.4% from the first quarter, the largest increase since 2016.
Student loan debt was little changed at $1.59 trillion.
The increase in borrowing accompanied by inflation at 8.6% annualized in the second quarter includes up 9.1% in June – the biggest move since November 1981 – according to the Bureau of Labor Statistics. Shelter inflation rose 5.5% year-on-year in June, and new and used car prices rose 11.4% and 7.1%, respectively.
In response to high inflation, the Fed raised interest rates four times by 2022, with a total increase of 2.25 percentage points. Those moves pushed 30-year mortgage rates to 5.41%, up more than 2 percentage points from the start of the year, by Freddie Mac.
Despite rising debt and inflation levels and higher interest rates, the crime rate has remained relatively stable.
“Although debt balances are growing rapidly, households as a whole have weathered the pandemic significantly, in no small part thanks to the extensive programs put in place to support them,” the post said. posted on the Fed’s blog said. “Furthermore, more household debt is held by borrowers with higher scores than even more historically than in our data.”
As of June, about 2.7% of outstanding loans were overdue, nearly 2 percentage points lower than in the first quarter of 2020 when the whole country was entering the Covid pandemic.
Fed economists note that delinquent rates are driving higher for subprime borrowers at the lower end of the line of credit.
