Household Debt on the Rise

The Federal Reserve Bank of New York’s Center for Microeconomic Data recently released its Quarterly Report on Household Debt and Credit—reporting that household debt increased while delinquency rates of several debt types continued to rise.

According to the report, total household debt increased by $116 billion to $12.96 trillion in Q3 2017.

LendingTree Chief Economist Tendayi Kapfidze said although household debt is at a high, the financial obligations ratio and household debt service ratios remain favorable because of income growth and lower interest rates.

“This favorable picture is dependent on low rates, which may face some upward pressure, but not to an extent we think will put borrowers under significant pressure,” said Kapfidze. “It is also dependent on strength in home prices which we expect to continue given tight housing inventory and a strong labor market.”

Overall, the New York Fed’s data found that mortgage debt increased by 0.6 percent, student debt increased by 1 percent, and credit card debt increased by 3.1 percent—while home equity lines of credit (HELOC) balances experienced a decrease by 0.9 percent.

Kapfidze added that HELOC balances continuing to fall indicates that homeowners are not accessing their record equity for consumption.

Additionally, the share of mortgage balances that were 90 or more days delinquent continued to improve, at 1.4 percent in Q3, which is a decrease from 1.7 percent at the beginning of 2017, and an improvement from the 8.9 percent high reached in 2010.

As 69,580 individuals had a new foreclosure notation added to their credit reports in Q3 2017, foreclosures represented a new historical low.

The report notes that its information is based on data from the New York Fed's Consumer Credit Panel, a nationally representative sample of individual and household-level debt and credit records drawn from anonymized Equifax credit data.

To view the full report, click here.