Household debt in the United States hits a record in Q3

The combined debt of U.S. households reached almost $14 trillion in the third quarter, up by $92 billion from the second quarter, according to the New York Fed.

Dan Burns reported the news for Reuters:

American households added $92 billion of debt in the third quarter, led by a rise in mortgage loans, and overall debt levels set another record, nearing $14 trillion, the Federal Reserve Bank of New York said on Wednesday.

The percentage of households behind on their debt payments also rose in the three months from July through September, the New York Fed said in its quarterly report on household debt. The aggregate delinquency rate rose to 4.8% from 4.4% in the second quarter, led by a pick-up in loans in the early stages of delinquency.

Mortgage debt rose by $31 billion to $9.44 trillion. Auto, credit card and student loan debt balances also rose.

“New credit extensions were strong in the third quarter of 2019, with auto loan originations reaching near-record highs and mortgage originations increasing significantly year-over-year,” said Donghoon Lee, research officer at the New York Fed. “The data suggest that households are taking advantage of a low-interest rate environment to secure credit.”

Business Insider’s Ben Wick noted this was the 21st consecutive quarter of rising debt:

Total US household debt grew by $92 billion to $13.95 trillion in the third quarter, marking the 21st consecutive quarter of increased borrowing.

The increase was primarily driven by multibillion-dollar jumps in housing debt and outstanding student loans, according to the Federal Reserve Bank of New York. Mortgage balances rose by $31 billion in the third quarter to $9.44 trillion, continuing an upward trend as mortgage rates fall further from 2018 highs.

Student loan debt jumped by $20 billion to $1.5 trillion in total. More than 10% of loans were at least 90 days delinquent or in default, the highest proportion among the Fed’s highlighted debt categories. 

Borrowers were likely “taking advantage of a low-interest rate environment,” New York Fed research officer Donghoon Lee said in a statement. The Federal Reserve issued its third rate cut of the year on October 30, slashing its benchmark interest rate by 25 basis points and signaling a pause to future adjustments.

Matt Egan reported for CNN:

Household debt ticked up 0.7% during the third quarter, the New York Federal Reserve said on Wednesday, continuing a five-year climb encouraged by low unemployment, strong consumer confidence and cheap borrowing costs.

Consumer debt is now about $1.3 trillion higher than the previous peak set in 2008, although these figures are not adjusted for inflation nor the larger size of today’s economy. Household debt has climbed about 25% from the post-recession low of $12.7 trillion.

Mortgages remains the largest chunk of Americans’ debt, accounting for $9.44 trillion. That’s up by $31 billion, or 0.3%, from the end of the second quarter, according to the NY Fed.

Student loans climbed by 1.4% to $1.5 trillion, while credit card balances rose $13 billion during the third quarter.

All of that borrowing, particularly credit cards and mortgages, support consumer spending — the biggest part of the US modern economy. But that debt will also become harder to repay during the next recession when unemployment rises.