Auto loan originations near record high, as household debt soars

As U.S. household debt reaches a trillion-dollar milestone, more Americans are taking out vehicle loans.

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Auto loan balances increased by $18 billion in the third quarter, according to the household debt report released by the New York Fed on Wednesday, to $1.32 trillion.

Auto loan originations — at $159 billion — were up slightly year over year, but volume is the second-highest ever recorded.

“The data suggest that households are taking advantage of a low-interest-rate environment to secure credit,” Donghoon Lee, research officer at the New York Fed, said in a statement.

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While aggregate delinquency rates rose in the third quarter to 4.8 percent, researchers noted that underwriting standards tightened for auto loans, and the median originating credit score rose 8 points to 771.

About 2.34 percent of auto loans were in serious delinquency, or 90 days-plus overdue. That rate is on par with the second quarter.

Auto loans considered in serious delinquency hit 4.3 percent in the first quarter, which raised concern as the labor market tightened and unemployment declined.

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Rising interest rates can cause delinquencies to swell. The Federal Reserve has recently resumed cutting its benchmark federal funds rate, which can cause interest rates to decline.

Mortgage debt, which is the leading source of household debt, increased by $31 billion to $9.44 trillion in the third quarter.

Overall, non-housing debt balances rose by $64 billion as credit card balances rose by $13 billion and student loan balances climbed $20 billion.

Total household debt was nearly $14 trillion, marking the 21st consecutive quarterly increase.

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