Falling Mortgage Debt Offsets Rise in Consumer Debt

In spite of a huge surge in auto loans,rnAmericans reduced their overall household debt by $78 billion duringrnthe second quarter the Federal Reserve Bank of New York said today. Total household indebtedness fell to $11.15 trillion in the secondrnquarter, a decrease of 0.7 percent from Quarter One and 12 percentrnbelow the peak debt of $12.68 billion reached in the third quarter ofrn2008. </p

The declining debt was due in largernpart to a reduction in its largest component, mortgage debt, whichrnfell $91 billion from the first quarter to $7.,84 trillion. Balancesrnof home equity lines of credit (HELOCs) declined as well, by $12rnbillion to $540 14billion.  Mortgage originations rose for thernseventh straight quarter to a total of $589 billion.</p

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While outstanding student loan debt andrncredit card balances each increased by $8 billion during the quarterrnit was auto loans that kept overall debt near Q1 levels. Autornoriginations totaled $92 billion in the quarter, the highest levelrnsince the third quarter of 2007 and outstanding auto loan debtrnincreased $20 billion, the ninth consecutive quarterly increase andrnthe largest in that sector since 2006. </p

The rate of 90+ day delinquencies for all household debt declinedrnto 5.7 percent from 6.1 percent in Q1 and the rate for everyrnindividual component of household debt also fell. The mortgagerndelinquency rate was 4.9 percent, down from 5.4 percent and HELOCrndelinquencies fell from 3.2 percent to 3 percent. Nonetheless 200,000rnindividuals had a new foreclosure notation added to their creditrnreports during the quarter, the first increase since Q1 2012.</p

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“Although overall debt declined in the second quarter,rnhouseholds did increase non-housing debt, led by rising auto loanrnbalances,” said Andrew Haughwout, vice president and researchrneconomist at the New York Fed.  “Furthermore, householdsrnimproved their overall delinquency rates for the seventh straightrnquarter, an encouraging sign going forward.” rn</p

The Federal Reserve Bank of New York’s Household Debt and CreditrnReport is based on data from the New York Fed’s Consumer CreditrnPanel, a nationally representative sample drawn from anonymizedrnEquifax credit data. The report provides a quarterly snapshot ofrnhousehold trends in borrowing and indebtedness, including data aboutrnmortgages, student loans, credit cards, auto loans andrndelinquencies. 

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