Rising delinquencies on auto loans and mortgages, continued rising credit card debt and record high collection balances: these are just a few signs that Americans are largely struggling to keep up with their debt.
In its new quarterly report released Wednesday, the Federal Reserve Bank of New York shows that household debt increased in July, August and September and now stands at a whopping $17.9 trillion. Total household debt, which includes mortgages, home equity loans and lines of credit, student loans, credit cards, auto loans and other types of debt such as store credit cards, is rfell by $147 billion last quarter, with growth across all types of debt being tracked.
Mortgage debt rose by $75 billion, and home equity lines of credit (HELOC) balances rose by $7 billion. All forms of nonmortgage debt tracked in the study also increased.
The New York Fed noted thaton the blog that income growth is outpacing debt growth among American households as a whole. Our collective debt-to-income ratio is 82%, up from 86% in 2019. Even as inflation has hit people’s wallets and higher interest rates make borrowing money more expensive, rising incomes have helped offset the loss of purchasing power.
But a closer look at the data shows that some households are falling behind, with low-income households particularly vulnerable.
Additionally, the youngest borrowers—ages 18 to 29—experienced greater financial distress than older borrowers, with a higher percentage of them holding debt that was 90 days or more delinquent.
More people are falling behind on house and car payments.
The report noted that delinquency rates rose in the third quarter across all debt categories, with 3.5% of all outstanding debts in some stage of delinquency, up from 3.2% last quarter. (Overdue debt is considered to be debt overdue for more than 30 days.)
In a blog post, the New York Fed noted that loan delinquency rates have been rising over the past couple of years and are now at about the same levels as before the pandemic, although credit card and auto loan delinquency rates are higher now than in 2019 .
Even more alarming, the report shows an increase in the number of these loans becoming so-called “seriously delinquent”—90 days or more delinquent. While falling behind on credit card bills can hurt your credit score and make it harder (or more expensive) to borrow money in the future, falling behind on loans secured by your home or car puts you at real risk of being seized by the lender. this collateral.
Serious delays, collection balances are growing
Debt overdue by more than 90 days increased across all debt categories compared to last year. These serious delinquencies were the highest in the credit card debt category, increasing to 11.1% in the third quarter. This is the highest figure since 2012.
While there hasn’t been a big jump in the number of people with accounts in debt collection (the stage where the debt has gone past due and been sent to a third-party collection agency), the amount owed by these debtors is skyrocketing, reaching a record average. maximum $1705.
Credit card debt continues to rise
For at least some households, the solution is to continue borrowing.
Americans increased their credit card debt by $24 billion during the quarter. That brings the total up about 8% from last year to nearly $1.2 trillion. With the average annual interest rate on bank-issued credit cards reaching a record high of 21.8% as of August, it’s clear that we’re paying significant amounts of money just to service our debt—and the burden is getting heavier for some borrowers.
Researchers at the Federal Reserve Bank of Philadelphia noted an alarming increase in credit card delinquencies earlier this year. In the first three months of 2024, delinquent credit card balances reached a 12-year high, although the number of delinquent accounts fell slightly.
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