U.S. household debt grew at the fastest rate since 2013 in the second quarter, driven by a mortgage boom as Americans took advantage of low borrowing costs and sought more space to work from home.
Household liabilities soared $ 313 billion to $ 14.96 billion at the end of June, up 2.1% from three months earlier, the New York Federal Reserve said in a report. report released Tuesday.
Most of the increase came from mortgage balances. With the 30-year average rate falling over the period, millions of Americans with good credit took the opportunity to refinance and reduce their monthly payments. According to the New York Fed, about 44% of the country’s total $ 10.4 trillion mortgage stock was created in the 12 months leading up to June.
“We have seen a very strong pace of mounts over the past four quarters, with new credit extensions for mortgages and auto loans combined with a rebound in demand for credit card loans,” said Joelle Scally of the Center for Microeconomic Data in New York. Fed.
The US real estate market has been so dynamic that many homeowners have higher levels of equity even though they have borrowed more. Home prices jumped 10.5% in the first half of 2021, according to Fannie Mae, the fastest pace on record. American homeowners took about $ 50 billion in home equity in the first quarter, the most in more than a dozen years.
However, the opportunity was not available to everyone. The availability of mortgage credit has been dropping sharply since early 2020, when the pandemic was declared a national emergency, according to the Mortgage Bankers Association. More than 71% of second-quarter mortgage originations were from borrowers with a credit score of at least 760, just below the record 73% in the previous three months.
For other types of credit, like auto loans and credit cards, lending standards have eased, according to the Fed’s senior loan officer opinion poll released Monday.
Overall, household debt levels – measured as a share of the economy – remain well below the highs recorded in the years leading up to the 2008 financial crisis. And some types of borrowing are still below pre-pandemic levels in dollar terms.
Credit card balances, while increasing $ 17 billion in the second quarter as the consumer economy rebounded, are about $ 140 billion lower than at the end of 2019.
Government pandemic policies – from one-off checks and additional unemployment benefits to loan forgiveness programs – have helped Americans stay up to date on their debt, with defaults declining in most loan categories .
The most important change concerns student debt. About 5.7% of university loans were more than 90 days past due or in default at the end of June, up from more than 11% before the pandemic.
New York Fed officials have said defaults may start to rise as Covid policies expire. The freeze on student loan repayments, for example, is due to end on September 30.