US household debt nears $16 trillion, but demand for mortgages and autos declines – NY Fed

The American flag flies in front of the Federal Reserve Bank of New York in New York, U.S., October 12, 2021. REUTERS/Brendan McDermid

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May 10 (Reuters) – U.S. household debt hit a record $15.84 trillion in the first quarter, driven almost entirely by a $250 billion rise in home loan balances, but the rise was the most weak in a year and new mortgage and auto loans fell for a third consecutive quarter.

The Federal Reserve Bank of New York’s quarterly household debt report released on Tuesday showed mortgage debt soared to $11.18 trillion at the end of March and now accounts for 71% of total household debt, the largest share. higher for about a decade.

But new lending — both for buying homes and refinancing existing mortgages — fell to $859 billion, the lowest since the second quarter of 2020. Still, it remains more than $100 billion higher. at the pre-pandemic level of the fourth quarter of 2019. .

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Still, the 17% drop was the biggest in five years and was largely the product of lower demand for refinancing, with borrowing costs rising rapidly in the quarter as the Fed began to raise. interest rates to fight inflation hitting four-decade highs. .

Auto loans also fell for a third straight quarter to $177 billion, but that was the highest level in any first-quarter period in the series’ history, dating back to 2003. Loan balances automobiles increased by $11 billion to $1.47 trillion.

Credit card balances rose from $856 billion to $841 billion, and student loan debt rose slightly to $1.59 trillion from $1.58 trillion.

“The first quarter of 2022 saw an increase in mortgage and auto loan balances coupled with a typical seasonal decline in credit card balances,” said Andrew Haughwout, director of the Households and Public Policy Research Division. at the New York Fed. “However, mortgage originations have declined from the historically high volumes seen in 2021, reflecting a slowdown in demand for refinancing.”

The average contract rate for a 30-year fixed-rate mortgage jumped more than 1.5 percentage points in the first three months of the year, according to the Mortgage Bankers Association. It has climbed further since, standing at 5.36% at the end of April, around the highest since 2009. The weekly MBA refinancing index is close to the lowest since 2018.

Overall default rates remained unchanged, the New York Fed said, but the report noted a slight increase in new delinquent loans, defined as those 30 days or less past due. This rate rose to 2.12% from 2.03% in the previous quarter, with the highest rate being among auto loans, up to 5.1% from 4.96%.

“Overall, households are in very good shape,” New York Fed researchers said on a call. “The overall picture looks very strong on the household side.”

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Reporting by Dan Burns; Editing by Andrea Ricci

Our standards: The Thomson Reuters Trust Principles.

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