Household debt rose sharply in 14 years to nearly $ 15 trillion in the second quarter.

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KB Home’s single-family homes are shown under construction in Valley Center, California, USA on June 3, 2021.

Mike Blake | Reuters

On Tuesday, the Federal Reserve said that household debt rose by a record dollar amount in 14 years in the second quarter, driven largely by a surge in the housing market that resulted in a US collective IOU of just under $ 15 trillion.

Total debt for the April-June period jumped $ 313 billion, the sharpest increase since the same period in 2007.

The share of debt increased by 2.1%, the fastest pace since the fourth quarter of 2013.

Most of the profits came from mortgage loansboth initial purchases and refinancing, which were ignited as the Federal Reserve kept benchmark borrowing rates around historic lows.

Mortgage balances during this period increased by $ 282 billion, up 2.8% from the first quarter and 6.7% from last year, to a total of $ 10.4 trillion.

Over the past four quarters, mortgage loans have been disbursed about $ 4.6 trillion, or 44% of all outstanding home loan balances.

But the growing debt was not only related to mortgages: non-housing balances rose by $ 44 billion.

Credit card balances increased by $ 17 billion and auto loans by $ 33 billion. Student loan debt actually declined over this period, dropping $ 14 billion to $ 1.57 trillion as abstinence programs kept education-related balances in check.

Indeed, efforts by the government as a whole to keep consumers safe through the Covid-19 pandemic have resulted in a decline in delinquency across the board. Collectively, about 2.7% of the debt was overdue, down 2 percentage points from the fourth quarter of 2019, just before the outbreak of the pandemic.

However, these breaks expire in the coming months, which creates problems for borrowers who now have to renew their loans.

“Over the past four quarters, we have seen a very high rate of new loan creation with new loan extensions for mortgages and auto loans, coupled with a rebound in demand for credit card borrowing,” said Joel Scully, administrator of the New York Federal Reserve Microeconomic Data Center. , the message says. “However, there are two million more borrowers who have received mortgage benefits who will become vulnerable to financial hardship after the abstinence programs come to an end.”

However, at least in the residential sector, the credit quality of borrowers was high.

The average credit rating for newly issued mortgage loans was 760, while 71% of all borrowers had a grade of more than 760. The share of mortgages becoming overdue was only 0.4%, which is a record low, while the share of mortgages constituting 90% was 0.5%. days or more overdue also set a new record for ongoing abstinence programs.

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