Total household debt reached $12.73 trillion in the first quarter of 2017, surpassing its $12.68 trillion peak reached during the Great Recession that began in 2008, according to the Federal Reserve Bank of New York’s newly issued quarterly update.
While not quite a reason to be alarmed, the milestone presents an opportunity to examine certain trends in the credit markets that are worth watching, officials said.
“This marked a $149 billion (1.2%) quarterly increase and nearly three years of continued growth since the long period of deleveraging following the Great Recession,” the New York Fed stated.
The quarterly report is based on a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data by the New York Fed.
Although debt has reached record heights, the N.Y. Fed stated, it took an unusually long time — from a historical perspective — for debt to reach the 2008 level again. Translation: We’re probably not headed toward another recession.
“Almost nine years later, household debt has finally exceeded its 2008 peak but the debt and its borrowers look quite different today,” said Donghoon Lee, Research Officer at the New York Fed. “This record debt level is neither a reason to celebrate nor a cause for alarm. But it does provide an opportune moment to consider debt performance.”
Most loan delinquency rates have improved substantially since the Great Recession and remain low overall. However, there are divergent trends among debt types, Lee said.
“Auto loan and credit card delinquency flows are now trending upwards, and those for student loans remain stubbornly high,” he added.
Here is a rundown by credit category from the N.Y. Fed’s report:
Mortgage balances increased again while originations declined and median credit scores of borrowers for new mortgages increased, reflecting tightening underwriting. Mortgage delinquencies worsened slightly and foreclosure notations increased but remained low by historical standards.
Auto loan balances continued their steady rise seen since 2011 while auto loan originations declined and median credit scores of borrowers for these new loans increased.
Credit card balances declined, delinquencies increased and the aggregate credit card limit increased for the 17th consecutive quarter.
Student loan balances increased – marking an increase in every year throughout the 18-year history of this series.