U.S. Household Debt Ticks Up to $11.7T

Americans increased their borrowing this summer, taking out more new mortgages for the first time in over a year while adding to their car, credit-card and education loans.

For the most part, consumers are taking on new loans carefully, yet late payments on one fast-growing category of debt--student loans--are worsening, new figures from the Federal Reserve Bank of New York show.

Household debt--including mortgages, credit cards, auto loans and student loans--rose $78 billion between July and September to $11.7 trillion. Debt levels had fallen the previous quarter and remain $1 trillion below their peak in 2008.

The numbers suggest Americans are gradually borrowing again after years of shedding debt. With cheaper gasoline and easier-to-find jobs, more borrowing could fuel holiday shopping and give more succor to the economy, which depends on consumers for roughly two-thirds of its activity.

Randy Hopper, vice president of credit cards at Navy Federal Credit Union, says he already sees this dynamic developing. Spending by the credit union's own customers has picked up, he said. Navy Federal expects a 0.5% increase in spending on retail and electronic goods this quarter, compared with just the same quarter last year.

Eva Lok and her husband are among those borrowing more.

Six months ago, the 40-somethings, who work full-time and have two young children, moved into a four-bedroom house about 20 miles away from downtown Chicago. They took on a new mortgage, but tried to limit its size by putting down money they saved and borrowing some $200,000 from family. The mortgage was around $500,000.

To do some renovating, the couple also took on some credit-card debt, though they're putting aside cash to pay that bill. "Our main goal is to not take on more than we are comfortable with," Ms. Lok said.

The Loks are emblematic of more Americans for whom efforts to pare back debts may have ended. "Households have begun to use credit to supplement their cash flow again," said New York Fed economist Andrew Haughwout in a note.

New mortgage loans, including refinanced mortgages, edged up to $337 billion after four straight quarters of declines, the Fed's figures showed. Total mortgage balances--the biggest part of Americans' debt--climbed $35 billion to $8.1 trillion.

While historically low, the uptick in new mortgages is a welcome sign for the nation's housing market, which has struggled even as the economy comes off its best six-month stretch of growth since 2003.

In addition, auto lenders made $105 billion in new loans, the highest level in nearly a decade. Outstanding student loans rose $8 billion to $1.1 trillion.

Credit-card balances, which have generally been slow to rise, are now slightly above year-ago levels.

Separate data released Tuesday showed the U.S. economy grew at an annualized clip of 3.9% last quarter, more than previously estimated--thanks partly to upwardly revised estimates of consumer spending.

Even amid the uptick in borrowing, Americans seem to be mindful of not biting off more than they can chew. And they are doing better paying their debts on time, both good signs given the borrowing binge before the financial crisis.

The share of mortgage debt seriously overdue dropped to 3.2% last quarter, from 3.4% in the second quarter. The share of seriously delinquent auto-loan debt also dropped, to 3.1%, from 3.3%--despite growing concerns about lax auto lending. Serious credit-card delinquencies eased, too.

Brian and Kim Jalet are making keeping their debt small a big priority.

While they have a mortgage, the Boston couple pay off their credit-card borrowings monthly. Since Mr. Jalet, 44, makes a healthy salary in the biotech industry, Ms. Jalet, 41, a former high-school teacher, decided to stay at home when they had their child. Despite the change in income, they're not borrowing more.

Ms. Jalet says her husband "wants to make sure we don't run into situations like when he was a kid."

One glaring problem in America's debt picture is student loans: The share of student-loan debt 90 or more days overdue rose last quarter to 11.1%, from 10.9%--and even this figure understates the problem, the New York Fed says.

Growing student-loan burdens are troubling to economists and policy makers because they could keep, or at least delay, younger Americans from saving or spending in other ways, such as buying homes.

And unlike other types of consumer debt, education loans are hard to discharge in bankruptcy--making them more of a potential drag on a borrower's consumer behavior.