Amid a household debt increase of $35 billion in Q2 and the mortgage sector’s share of that debt declined from a huge spike in Q1, according to the latest Quarterly Report on Household Debt and Credit, The Federal Reserve Bank of New York recently released data for Puerto Rico’s banking sector to complete the picture of household debt for the Commonwealth.
The Puerto Rico data for household debt, consisting of over 125,000 anonymized credit reports for those residents, holds many similarities to the national United States data. For example, the report states that debt in Puerto Rico peaked in the second quarter of 2008, just as it did in the U.S. during the same time. Additionally, aggregate debt in Puerto Rico declined 13 percent from its 2008 peak to 2015. This is extremely similar to the peak-to-trough figure for the U.S. as a whole which declined 12 percent.
Despite these similarities, there is a crucial difference between Puerto Rico and the U.S. This comes into play as, in spite of a slight bounce-back in 2012, household debt in Puerto Rico continues to fall. Currently, the nation as a whole has retraced three quarters of its decline, and debt to date is just 3 percent below its previous peak. On the other hand, Puerto Rico’s household debt is still 12 percent below its second-quarter 2008 peak, and debt at the end of 2015 was lower than it was a decade earlier.
Over half of all household debt in Puerto Rico is consisting of mortgages. Mortgages make up 60 percent of total household debt in the Commonwealth compared with 69 percent in the nation as a whole. Mortgage balances average $70,000 in Puerto Rico compared with $122,000 in the U.S.
Another major characteristic of indebtedness is performance, specifically if borrowers able to keep up with their payments. In the United States, a large contributing factor to mortgage delinquencies was leading to the financial crisis. Since their peak in 2009, however, U.S. mortgage delinquencies have come down sharply. This has not been the case for Puerto Rico, though, where the serious delinquency rate on mortgages has remained particularly high, at 7 percent compared with 8 percent at the 2010 peak.