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U.S. household debt continued growing in the second quarter this year, pushed by increased mortgage borrowing, according to a recent report from the Federal Reserve Bank of New York. Yet as household debt has grown, fewer student loan borrowers are late on their payments.
During the second quarter, total household debt increased 0.6 percent from the previous quarter, rising by $82 billion to hit record heights of $13.3 trillion and undergoing a 16th consecutive quarter with an increase. Household debt includes auto loans, credit cards, mortgages (the largest component), student loans and other credit, according to Bloomberg.
But, as debt jumped in the second quarter, loans going into delinquency dropped to 4.52 percent—the lowest recorded level since 2003. The fall predominately came from student loans as the rate of delinquent loans has declined 1.3 percentage points over the last year.
“While overall delinquency rates have remained stable at relatively low levels, transition rates into delinquency have fallen noticeably for student debt over the past year, reflecting an improved labor market and increased participation in various income-driven repayment plans,” Wilbert van der Klaauw, senior vice president at the New York Fed, said in a press release by the New York Fed.
Auto loan balances again trended higher – a six-year phenomenon – by $9 billion in the second quarter, to $1.24 trillion.
Credit card balances increased by $14 billion (1.7 percent), after the first quarter’s seasonal decrease.
Delinquencies, Collection Accounts, and Credit Inquiries
Credit card delinquency rates slightly fell as 7.9 percent of balances 90 or more days were delinquent at the end of the second quarter, versus March 31’s 8 percent.
For consumers with an account in collections, this share dropped 23.4 percent from the time period of 2017’s third quarter to 2018’s second quarter (falling from 12.3 percent to 9.4 percent). This came from reporting requirement changes by collections agencies.
Within the last six months, credit inquiries, viewed as a consumer credit demand indicator, was relatively unchanged. This has been at its lowest levels since the number started using data.
Author: Debbie Baratz
Debbie Baratz has written about topics including personal finance, financial markets, and banking. And as a media relations professional, she spent 10+ years working at not-for-profit, private, and publicly-traded financial institutions. When Debbie isn’t working, she can be found working out, reading, or traveling.