Household Debt Crosses $14 Trillion In The US

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• Data has revealed that household debt in the US has increased beyond $14 trillion, largely driven by mortgage debt increase.
• Other debt forms, including student loans, credit card debt, and auto loans, also increased during the fourth quarter of 2019.
• Delinquencies are also on the rise, especially among young consumers, and economists believe this is due to crippling student debt balances.

According to data reported by the Federal Reserve Bank of New York, household debt in the US saw an increase of $193 billion during the fourth quarter of 2019, mostly due to an increase in the demand for mortgage loans. The total household debt now stood at $14.15 trillion by the end of the previous quarter.

Out of the total household debt, $9.56 trillion is owed in mortgage balances, which includes an increase of $120 billion during the quarter. The number of mortgage originations also rose due to a surge in refinancing activity, rising to an impressive $752 billion during the fourth quarter, its highest volumetric point since the same quarter of 2005, according to reported figures.

The report also highlighted student loans and showed a growth of about $10 billion during the same quarter. This growth is slower if compared with figures from five years earlier, but the total outstanding student debt now stands at a massive $1.51 trillion which, in the opinion of many experts, is preventing many from building a strong credit profile to secure cheaper debt financing.

An expected increase during the fourth quarter of 2019 was the holiday season surge in credit card debt, and it did increase by $46 billion as per the reported figures. However, economists have pointed out that this increase was higher than is usually witnessed during the holidays.

According to Wilbert Van Der Klaauw, who works for the New York Fed as its Senior Vice President, there was a significant increase in the mortgage activity during CY Q4 2019. Also, Klaauw mentioned, auto loan financing also showed a consistently strong pace during the year. However, when it came to credit card debt, Klaauw highlighted that there is an uptrend since 2016 among credit card borrowers falling into delinquency, especially those falling in the younger demographics.

Data has shown that about 2.36% of all outstanding loans became delinquent for over a period of 90 days during the quarter, which is higher than the 2.27% reported during 2019’s third quarter. Younger borrowers seem to be facing the biggest problem, with delinquencies increasing especially in student debt, credit card debt, and also auto loans.

These young borrowers fall within and around the 20-30 age bracket and, according to economists, increasing levels of delinquencies among this age group could be stemming from student debt that is disabling millions from being able to pay their monthly bills.