Household debt rises at fastest pace since 2008

Mortgage balances account for large portions of the debt load

Household debt rises at fastest pace since 2008

Household debt has jumped at its fastest annual pace since 2008 following increases in mortgage and credit card balances during the third quarter.

According to data from the Federal Reserve Bank of New York, overall household debt grew by $351 billion from July to September to a total $16.5 trillion. Bloomberg reported that this was 8.3% above last year’s figures, representing the biggest annual jump since the 9.1% increase seen in the first quarter of 2008.

Mortgage debt accounted for the largest portion of this increase, rising $1 billion from a year ago to $11.7 trillion. Mortgage and home-equity debt combined also increased by $2 trillion since the pandemic began, according to Bloomberg.

Credit card debt was another significant contributor to the overall debt load, increasing 15% annually, the largest upswing in more than 20 years. Credit card balances were also shown to have increased more for borrowers aged 30 to 59 and those in lower-income areas. Comparatively, borrowers aged 60 and 79, along with those in higher-income areas, had balances that were below pre-pandemic levels.

Considering the impact of inflation, Fed researchers said it isn’t surprising to see household balances rise.

“The real test, of course, will be to follow whether these borrowers will be able to continue to make payments on their credit cards,” they said.

The researchers added that delinquency rates had remained “low by historical standards,” suggesting that consumers have generally been able to manage their finances amid growing economic pressures.

According to the Fed’s report, auto loan balances increased by $22 billion in the third quarter to over $1.5 trillion, continuing an upward trajectory that has been ongoing for the last 10 years. Meanwhile, student loan balances contracted slightly to $1.6 trillion, down $15 billion from the previous quarter.