American household debt is on the rise, and a big reason for the spike is an increase in aggregate mortgage balances nationwide, according to data from the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit.
Mortgage balances, which are the largest component of household debt, spiked by $144 billion from Q2 to Q3 2015 up to $8.26 trillion. Meanwhile, overall aggregate household debt balances swelled to $12.07 trillion quarter-over-quarter in Q3, an increase of $212 billion.
The good news is that Q3’s total of overall household debt of $12.07 trillion is still about 5 percent below its peak of $12.68 trillion reached in Q3 of 2008.
Delinquency trends for housing were positive, with foreclosures hitting a new low in the 17 years the New York Fed has been reporting the data. Quarter-over-quarter in Q3, the percentage of mortgages that were 90 days or more delinquent dropped from 2.5 percent to 2.3 percent.
Year-over-year in Q3, the share of consumers who added a bankruptcy notation to their credit reports declined by 14 percent. The percentage of aggregate student loan debt that was three months or more delinquent or in default in Q3 remained high at 11.3 percent, however.
While student loan debt and credit card debt balances increased by $13 billion and $11 billion, respectively, the balances on home equity lines of credit (HELOCs) dropped by $7 billion in Q3.
The New York Fed’s Quarterly Report on Household Debt and Credit is based on data from the bank’s Consumer Credit Panel, a nationally representative sample of household credit data drawn from anonymized Equifax credit data.
Many Americans are still struggling with mortgage debt, which is the third most-popular form of debt in the nation. Much of this debt stems from borrowing at the wrong time and for the wrong purpose, preventing consumers from achieving financial stability.
An Urban Institute report titled, "Americans’ Debt Styles by Age and over Time" released recently found that 54.5 percent of those ages 18-22 are debt free, while 39.2 percent of those ages 23-27 are debt free. However, as borrowers age, that number drops drastically to 18.1 percent for the 63-67 age group, but rises for those over 77 at 36.1 percent.
In 2014, mortgage debt was the third-highest form of debt among consumers, with 28 percent holding some form of housing-related debt, the report showed. The highest percentage of consumers have mortgage debt in their late 30s through their early 60s. For borrowers with mortgages, debt balances averaged $160,000 in 2014, up from $150,000 in 2010.
"These debt patterns reflect lifestyle changes as consumers get older: they finish their higher education and largely pay off the associated debt in their 20s and 30s, finance and become auto and homeowners in their 30s through their 60s, and accumulate enough equity on their homes to finance other spending against that equity in their late 40s through late 60s," the report said.