NEW YORK Nov 14 U.S. household debt rose in the
latest quarter by the most in more than five years and the share
of student loans in delinquency hit a record high, data from the
Federal Reserve Bank of New York showed on Thursday.
Total consumer debt rose 1.1 percent to $11.28 trillion in
the third quarter, the New York Fed said in its quarterly
household debt and credit report. That marked the biggest
quarterly jump since the first three months of 2008.
Americans have consistently deleveraged in the years since
the housing collapse and financial crisis, and credit is well
below the peak of $12.68 trillion in the third quarter of 2008.
The increase in the third quarter suggests, however, that
the deleveraging cycle may be nearing its end. Americans boosted
credit card balances, borrowed more to buy homes and cars and
took on more student debt.
"This quarter we observed an increase of household balances
across essentially all types of debt," Donghoon Lee, senior New
York Fed research economist, said in a statement. "With
non-housing debt consistently increasing and the factors pushing
down mortgage balances waning, it appears that households have
crossed a turning point in the deleveraging cycle."
The continued rise in student debt could be a cause for
concern. Outstanding balances rose $33 billion to $1.03 trillion
in the third quarter. A record 11.8 percent of loans were behind
by 90 days or more, the New York Fed said, up from 10.9 percent
in the second quarter.
Student debt cannot be discharged under current bankruptcy
law, and economists worry that delinquencies can lock people out
of economic participation.
"Being delinquent hurts one's credit rating, making it
harder to buy a house and generally participate in a
credit-driven economy," said Michael Hanson, U.S. economist at
Bank of America Merrill Lynch.
"But it's hard to know how systemic a risk this is," he
said, noting the amounts on delinquent loans can vary widely.
Auto loan balances jumped by $31 billion, the 10th straight
quarterly increase, and new loan originations increased to $97.4
billion, the highest since the third quarter of 2007, reflecting
a rebound in a key sector of the U.S. economy.
Overall household delinquency rates dropped to 7.4 percent
in the three months to September from 7.6 percent in the second
quarter, extending a post-recession trend.
The report also showed outstanding mortgage balances rose by
$56 billion to $7.9 trillion, while 1.6 percent of existing
mortgages fell into delinquency, up from 1.5 percent the prior
quarter. Mortgages are the largest segment of consumer debt.
Foreclosures, which have been declining since the second
quarter of 2009, hit their lowest levels since the end of 2005.
Meanwhile, lenders made slightly fewer mortgages with
originations slipping to $549 billion from $589 billion.
Elsewhere, credit card balances edged up by $4 billion,
while the number of credit account inquiries over six months -
an indicator of consumer credit demand - rose to 168 million
from 159 million the prior quarter.