Household debt is topping its 2008 peak prior to the housing crash. Total household debt has risen to $12.73 trillion in the first quarter, the Federal Reserve Bank of New York reported Wednesday.
However, Americans are handling their debt—mortgages, credit cards, auto loans, and other forms of borrowing—much better, the report shows.
Americans were delinquent on 4.8 percent of total debt in the first quarter. For comparison, at the end of 2009, 11.9 percent of consumers were delinquent on their debt by at least 30 days.
The increase in household debt may indicate that more Americans are confident about their jobs and overall economy.
“This record debt level is neither a reason to celebrate nor a cause for alarm,” says Donghoon Lee, research officer at the New York Fed. “Borrowers look quite different today.” He says they tend to be older and have better credit than a decade ago.
He does note that auto loan and credit card delinquencies are trending up recently. He also says that student loan delinquency rates “remain stubbornly high.”
Mortgages are making up a smaller percentage of total household debt than they did in 2008, according to the Fed. Mortgage debt accounted for 73 percent of the total household debt in 2008. Now, it comprises about 68 percent. Experts point to tougher lending standards as one explanation for the drop.
Auto and student loan debt, meanwhile, have increased their shares at 9.2 percent and 10.6 percent, respectively. Credit cards have remained about the same, the Fed reports.
Source: “U.S. Household Debt Tops 2008 Peak, But This Time Americans’ Finances Are Better,” The Los Angeles Times (May 17, 2017)