New mortgage and auto loan originations also surged, according to the New York Federal Reserve.
Consumer credit balances and loan originations increased in the last quarter and delinquency rates declined; however, the end of loan forbearance programs and payment delays implemented during the COVID-19 pandemic may influence those trends going forward, according to the New York Federal Reserve’s Quarterly report on Household Debt and Credit.
Overall, the data from the New York Fed’s Consumer Credit Panel shows total household debt increased by $313 billion (2.1%) to $14.96 trillion in the second quarter this year.
“The total debt balance is now $812 billion higher than at the end of 2019. The 2.1% increase in aggregate balances was the largest seen since Q4 2013 and marked the largest nominal increase in debt balances since Q2 2007,” the Fed reports in a news release.
Here are a few key findings:
- Credit card balances increased by $17 billion in the second quarter. However, credit card balances were still $140 billion lower than they had been at the end of 2019.
- Mortgage balances—the largest component of household debt—increased by $282 billion and reached $10.44 trillion at the end of June.
- Auto loans increased by $33 billion, but student loan balances declined by $14 billion.
- Overall, non-housing balances (combining credit card, auto loan, student loan, and other debts) increased by $44 billion. The rise in auto loans and credit card balances offset the drop in student loan balances.
“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,” said Joelle Scally, Administrator of the Center for Microeconomic Data at the New York Fed, in the news release. “However, there are still two million borrowers in mortgage forbearance who are vulnerable to financial distress once the forbearance programs come to an end.”
Forbearances granted through the Coronavirus Aid, Relief, and Economic Security (CARES) Act and those from lenders were reflected in a decline in aggregate delinquency rates across all debt products since the beginning of the pandemic recession, according to the Fed.
For example, the share of student loans that are reported as delinquent remains very low because most outstanding federal student loans are covered by CARES Act forbearances.
Credit card delinquency transition rates also continued to drop in the second quarter, reflecting the impact of government stimulus programs and bank-offered forbearance options for troubled borrowers, according to the Fed.
The Department of Education’s student loan forbearance is in place until at least Sept. 30, 2021. The Biden administration has previously extended the student loan forbearance several times, ACA International previously reported.
The Fed found that total student loan debt was $1.57 trillion in the second quarter, a $14 billion decline from the first quarter. Approximately 5.7% of aggregate student debt was 90 or more days delinquent or in default in the second quarter.
The Fed also issued a blog examining the declines in the forbearance rate by state and focused on mortgages.
Read the complete quarterly household debt report here.