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New York Fed Finds Increasing Debt Levels in Q1

Americans increased their borrowing in the first quarter, but little of that stemmed from new mortgage lending, according to data released Tuesday by the New York Federal Reserve.

The New York Fed recorded an increase of $129 billion in national outstanding household debt in the first three months of the year, bringing the total debt level up to $11.65 trillion. It was the third straight quarterly gain.

Leading the increase was a rise in mortgage debt, which was up by $116 billion from the end of 2013, according to the bank. However, with originations dropping to $332 billion—the lowest level since the housing recovery started—there was little to celebrate on that front.

Among other issues—including an apparent lack of loan demand and tight credit restrictions—ongoing weakness in new lending can in part be attributed to younger consumers, who are already overburdened with debt and reluctant to take on more.

As economists for the New York Fed explain in a blog post for the bank: “One possible reason for the failure of student borrowers’ housing and auto consumption to return to pre-recession levels is the growing burden of student debt. ... Despite an 11 percent house price recovery over the course of 2013 and an increase in overall mortgage debt, thirty-year-olds with and without student loans continued to retreat from the housing market.”

Incidentally, student loan debt was up $31 billion over the quarter and remains second only to mortgage debt at a total of $1.11 trillion.

More encouragingly, delinquency rates improved across most categories compared to the fourth quarter. Among all mortgage debts, the New York Fed recorded a 90+ day delinquency rate of 3.7 percent, down from 3.9 percent a few months earlier.

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