US household debt surged to nearly $15T in second quarter, a new record
Mortgage balances were the largest component of household debt in the US and jumped in the second quarter to $10.4 trillion
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U.S. household debt rose at the fastest pace in years during the spring, driven by a surge in credit card spending and home purchases, the New York Federal Reserve said in a quarterly report released Tuesday.
Between April and June, total debt balances soared by $313 billion – the largest nominal increase since 2007 and the biggest percentage jump since 2014. In total, American consumers held about $14.96 trillion in debt at the end of June, the most on record.
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It's roughly $2.28 trillion higher than the previous peak of $12.68 trillion in the third quarter of 2008, in the midst of the Great Recession, and about $812 billion more than what was owed before the pandemic hit.
"We have seen a very robust pace of originations over the last four quarters with new extensions of credit for mortgages and auto loans combined with rebounding demand for credit card borrowing," Joelle Scally, administrator of the Center for Microeconomic Data at the New York Fed, said in a statement.
Mortgage balances, the largest component of household debt in the U.S., jumped by $282 billion in the second quarter to $10.4 trillion. The bulk of the increase stemmed from mortgage originations as the Federal Reserve held in the interbank lending rate near zero, leading to ultra-low borrowing rates and a spike in refinancing among homeowners.
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Over the past four quarters, mortgage originations hit a record high, totaling close to $4.6 trillion or roughly 44% of all outstanding home balances.
Credit card balances, meanwhile, rose by $17 billion in the second – well below the $140 billion level at the end of 2019, before the virus shut down broad swaths of the nation's economy. Auto loan balances jumped by $33 billion.
The rise in credit card and auto loans balances was offset by a decline in student loan balances, the only category that declined last quarter. Student loan balances shrank by $14 billion over the three-month period, falling to about $1.57 trillion.
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The drop largely reflects the relief program implemented by Congress in March 2020 that froze student loan payments until Sept. 30. Payments are slated to resume on Oct. 1, after a 19-month pause that benefitted roughly 19 million Americans.