According to the latest Quarterly Report on Household Debt and Credit from the Federal Reserve Bank of New York, total household debt increased by $192 billion (1.4%) to $13.86 trillion in the second quarter of 2019. This is the 20th consecutive quarter with an increase the Fed’s Center for Microeconomic Data (CMD) notes.
Specifically, the CMD report states that Mortgage balances—the largest component of household debt—rose by $162 billion in Q2 2019 to $9.4 trillion slightly higher than the previous high of $9.3 trillion from the Q3 2008. Meanwhile, non-housing balances increased by $37 billion in the second quarter, with a $17 billion increase in auto loan balances and a $20 billion increase in credit card balances offsetting an $8 billion decline in student loan balances.
“While nominal mortgage balances are now slightly above the previous peak seen in the third quarter of 2008, mortgage delinquencies and the average credit profile of mortgage borrowers have continued to improve,” said Wilbert van der Klaauw, SVP at the New York Fed. “The data suggest a more nuanced picture for other forms of household debt, with credit card delinquency rates continuing to rise.”
In a blog post, The New York Fed took a look at recent changes in delinquency. According to the Fed, severely derogatory balances are now half of all delinquencies.
“Although the housing crisis produced a huge increase in severely derogatory mortgages, that effect has dissipated as the foreclosure pipeline has cleared out in even the slowest states,” the Fed states. “Today, auto and especially student loan balances are the interesting components: in the second quarter of this year, the outstanding severely derogatory balance is comprised of 35 percent defaulted student loans, which have grown stunningly since 2012.”
Student loans have overtaken mortgage debt in severe derogatories, while auto loans are now 21 percent of the outstanding severely derogatory balance, a larger share than what we’ve seen historically as the auto loan market has expanded and auto loan delinquencies have been increasing for subprime borrowers in the past five years.