Total mortgage balances post ‘substantial’ increase in Q4

Unlike overall debt balances, however, mortgage balances remain below their previous peak

Total mortgage balances post ‘substantial’ increase in Q4

Mortgage debt balances totaled $8.88 trillion in the fourth quarter, a quarter-over-quarter increase of $139 billion and a year-over-year gain of $402 billion, according to the Quarterly Report on Household Debt and Credit released by The Federal Reserve Bank of New York.

The 1.6% quarterly increase in mortgage balances was the most substantial gain seen in several quarters. However, mortgage balances remain 4.4% below their previous peak. Meanwhile, overall debt balances last year exceeded their previous peak recorded in the third quarter of 2008.

“Despite recovered house prices, mortgage balances remain far below their previous peaks in the states that were hardest-hit by the Great Recession,” New York Fed Research Officer Donghoon Lee said. “While the subdued mortgage balance levels of these areas should not necessarily be interpreted as a negative outcome, the regional differences clearly show that the echoes of the financial crisis still linger.”

As mortgage balances substantially increased, the median credit score among borrowers taking out new mortgages fell slightly, according to the New York Fed. Additionally, the report found a continuous improvement in the share of mortgage balances that were seriously delinquent. The share of mortgages in early delinquency that cured by becoming current on the debt improved to 35.9%, from 30.9% in the third quarter.

During the fourth quarter, total household debt rose 1.5% to $13.15 trillion. The increase represents the fifth straight year of positive annual household debt growth. Balances of other debt types also grew during the quarter. Credit card debt rose 3.2%, student debt climbed 1.5%, and auto debt ticked up 0.7%. The quarter posted another slight decline in the balances of home equity lines of credit, which decreased by 0.9%.

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