A report by the Federal Reserve Bank of New York’s Center for Microeconomic Data puts total household debt in the second quarter of 2022 at $16.15 trillion, an increase of $312 billion (2%) from the first quarter. Household debt totals at the end of the second quarter of the year were $2 trillion higher than they were at the end of 2019, before the Covid-19 pandemic.
The New York Fed said that nationwide mortgage balances rose by $207 billion in the second quarter of 2022 and ended the quarter totaling $11.39 trillion. That balance is expected to go higher as the year progresses due in large measure to increases in mortgage interest rates that reflect the Federal Reserve”™s policy of increasing interest rates as a strategy to combat inflation.
Credit card balances increased by $46 billion in the second quarter of the year, resulting in a 13% increase in outstanding balances on credit cards since the second quarter of 2021.
“The $46 billion increase in credit card balances this quarter was among the largest seen in our data since 1999, at least partly reflecting inflation on consumer goods and services purchased using credit cards,” New York Fed analysts Andrew Haughwout, Donghoon Lee, Daniel Mangrum, Joelle Scally, and Wilbert van der Klaauw said in a jointly-written commentary. “Americans are borrowing more, but a big part of the increased borrowing is attributable to higher prices.”
The analysts concluded that households in general have weathered the pandemic remarkably well, due in no small part to various programs put in place to support them.
“Further, household debt is held overwhelmingly by higher-score borrowers, even more so now than it has been in the history of our data,” the analysts said. “Mortgages represent the largest household debt product, and their balances dominate the overall total. Since the financial crisis, mortgage underwriting has been tight, and the vast majority of mortgage balances are now held by borrowers with high credit scores.”
There was $758 billion in newly-originated mortgage debt in Q2 of 2022, with 65% of it originated to borrowers with credit scores over 760. While an average of 13% of newly-originated mortgages went to subprime borrowers in the years 2003 through 2007, in the second quarter of this year only 3% went to subprime borrowers.
Outstanding balances on auto loans were up by $33 billion in the second quarter, while student loan balances were roughly unchanged from the first quarter and stood at $1.59 trillion. Balances on credit cards issued by retailers and other consumer loans increased by $25 billion. In total, non-housing balances grew by $103 billion, the largest increase seen since 2016.
The analysts found that when delinquencies are studied by zip code and incomes of discrete neighborhoods, low-income areas are seen to be having increasing delinquency rates.
“These rates appear to be resuming a trend in rising delinquencies among subprime borrowers,” the analysts said. “We are seeing a hint of the return of the delinquency and hardship patterns we saw prior to the pandemic. Despite that, many are experiencing a strong economy and robust consumer demand, but the impacts of inflation are apparent in high volumes of borrowing.”
