US Household Debt Rises For 21st Quarter, Lifted By Mortgages

WASHINGTON – Americans increased their borrowing for the 21st straight quarter as more households took out loans to buy homes or refinance existing mortgages, according to a report released Wednesday from the Federal Reserve Bank of New York.

Total U.S. household debt rose $92 billion, or 0.7%, to $13.95 trillion in the third quarter, the New York Fed's quarterly household credit and debt report showed. That's $1.3 trillion above the previous peak in 2008.

Mortgage borrowing rose by $31 billion to $9.44 trillion. Mortgage rates have fallen since the end of 2018, while the Fed reduced rates three times amid trade uncertainty and slowing global growth.

Donghoon Lee, research officer at the New York Fed, pointed to mortgage originations significantly increasing year-over-year. "The data suggest that households are taking advantage of a low-interest rate environment to secure credit," he said in a statement.

Student debt, held by roughly 45 million borrowers, increased to $1.5 trillion. Newly issued auto loans totaled $159 billion, while the median credit score for this debt increased to 711, an 8-point jump from the second quarter.

Low unemployment and increasing wages drove bankruptcy filings down to 186,000 from the 215,000 in the third quarter of 2018.

Still, aggregate delinquency rates worsened last quarter – 4.8% of outstanding debt was overdue, a 0.4 percentage point increase from the second quarter.

Among student debt, one in nine borrowers were 90+ days delinquent or in default in 2019, and this figure may be understated about half of student loans are currently in deferment, in grace periods or in forbearance and therefore temporarily not in the repayment cycle. Once these loans enter the repayment cycle, delinquency rates are projected to be roughly twice as high, according to the Fed report.