KB Home’s construction of single-family homes is shown under construction in the Valley Center community, California, the United States, June 3, 2021.
Mike Blake | Reuters
Household debt rose by the highest dollar amount in 14 years in the second quarter, largely thanks to a surge in the real estate market that pushed American collective bonds close to $ 15 trillion, the Federal Reserve reported Tuesday.
Total debt balances rose $ 313 billion from April through June, the largest increase since the same period in 2007.
In terms of debt, this meant an increase of 2.1%, the fastest increase since the fourth quarter of 2013.
Most of the profit came from mortgage loans, both first-time purchases and refinances, which were on fire as the Federal Reserve kept benchmark lending rates at historic lows.
Mortgage balances rose $ 282 billion for the period, up 2.8% from the first quarter and 6.7% year over year to a total of $ 10.4 trillion.
Mortgage lending for the past four quarters was nearly $ 4.6 trillion, accounting for 44% of all outstanding home loans.
But the rising debt wasn’t just mortgages, with $ 44 billion in non-residential portfolios.
Credit card balances rose $ 17 billion while auto loans rose $ 33 billion. Student loan debt fell as much as $ 14 billion to $ 1.57 trillion during the period as deferral programs kept education-related balances in check.
Indeed, overall government efforts to get consumers through the Covid-19 pandemic resulted in low crime rates across the board. Overall, about 2.7% of debt was in some form of late payment, a 2 percentage point decrease from the fourth quarter of 2019, just before the pandemic broke out.
However, these interruptions will expire in the coming months, creating challenges for borrowers who now need to update their loans.
“We have seen a very robust pace of issuance over the past four quarters with new loan extensions for mortgages and auto loans combined with a recovery in demand for credit card loans,” Joelle Scally, administrator of the New York Fed’s Center for Microeconomic Data, said in a Explanation. “However, there are still two million borrowers who have run into financial hardship after the deferral programs expire.”
However, at least in the residential sector, the credit quality of borrowers is high.
The average credit score for newly issued mortgages was 760, with 71% of all borrowers having a score above 760. The percentage of defaulted mortgages was just 0.4%, a record low, while the percentage of mortgages was 90 at 0.5%. days or more overdue also set a new record among ongoing forbearance programs.
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