The Federal Reserve Bank of New York found that household debt across all types increased substantially for the quarter ended December 31, 2016, according to its quarterly report on household debt and credit. Household debt in the U.S. totaled $12.58 trillion during the fourth quarter, a leap of $226 billion or 1.8% from the previous quarter.
Overall, the 4Q2016 household debt is 0.8% below the third quarter of 2008’s peak of $12.68 trillion and is 12.8% above the second quarter of 2013’s trough.
Mortgages Lead the Pack
The NY Fed’s Quarterly Report on Household Debt and Credit revealed that mortgage balances took up the largest component of the total household debt. They totaled $8.48 trillion as of December 31, an increase of $130 billion from the previous quarter. Home equity lines of credit balances stood at $473 billion, which is characterized by the report as roughly flat.
Non-housing debt levels also grew during the relevant quarter. Auto loan balances showed an increase of $22 billion, credit card balances with $32 billion and student loan balances of $31 billion.
“The boost to balances was in part due to stronger new extensions of credit,” according to the NY Fed research.
Debt by the Numbers
4Q Housing Debt
- $617 billion in newly originated mortgages, the highest since the Great Recession (vis-a-vis third quarter of 2007). The report measures mortgage originations as “appearances of new mortgage balances on consumer credit reports and which include refinanced mortgages”.
- 1.6% of mortgage balances were 90 or more days delinquent, the level being unchanged.
- A slightly improved delinquency transition rate. One percent (1%) of the current mortgage balances transitioned to delinquency, down from 1.2% of the preceding quarter. As to mortgages in early delinquency, 18% transitioned to being 90+ day delinquent and 37% of which became current.
- 7,900 individuals’ credit reports had a new foreclosure notation.
4Q Non-Housing Debt
Discover today’s rates on personal loans, credit cards and auto loans.
1. Student loans: Outstanding balances on student loans grew by $31 billion, totaling $1.31 trillion. Of the total student loan debt, 11.2% was 90 days and more delinquent or in default status.
2. Auto loans: Balances showed a steady rise of $22 billion. For the full year 2016, $142 billion worth of auto loans was originated, making it the biggest year so far in the research report’s 18-year history data. The delinquency rate on auto loans however increased. Notably 3.8% of the aggregate auto loan balances are in 90 or more days delinquent, up 0.2% from last year.
3. Credit cards: Balances on credit cards totaled $779 billion, an increase of $32 billion. The rate of credit card delinquency of 90 days and more remained at 7.1%. The total credit limit increased by 2.3% for 16 consecutive quarters now.
Distribution of Credit Scores, Delinquency
During 4Q16, credit tightened a bit for mortgage and auto loan borrowers as shown by the credit scores of those loans originated.
The median score for auto loan borrowers rose to 700 while the origination score for mortgages increased to 763.
Of the new mortgages in 4Q16, 58% of them were made to borrowers with scores higher than 760 vis-a-vis 54% in 2015. Auto loans originated for borrowers with credit scores of over 760 increased to 32% in terms of dollars compared to the first three quarters of 2016’s 29%.
As of December 31, 4.8% of the outstanding debt was somewhat delinquent. Of the $607 billion in delinquent debt, $412 billion was classified as seriously delinquent being 90 days or more late.
The research noted: “Delinquency rates were roughly stable in the last quarter of 2016, with a small uptick in severely derogatory balances offset by a modest improvement in 30 days delinquent balances.”
Meanwhile, there were a fewer number of consumers whose credit reports had a bankruptcy notation this quarter. The number was 4% down from the same period last year and considered by the NY Fed as a new series low record.
The NY Fed’s Household Debt and Credit Report hinges on its Consumer Credit Panel, which is a nationally representative sample drawn from Equifax credit report data.