Credit Advisor logo 4

GET OUT OF DEBT WITH NO REGRET

Credit Advisor logo 4

Total Household Debt Climbs To Over $15 Trillion In Q3 2021, Driven By New Extensions Of Credit

DISCLAIMER: As the COVID-19 public health situation evolves, new regulations are being continually issued. This page/story/information may not include the most recent information.. TOTAL HOUSEHOLD DEBT CLIMBS TO OVER $15 TRILLION IN Q3 2021, DRIVEN BY NEW EXTENSIONS OF CREDITCredit card balances increase again by $17 billion in the third quarter of 2021November 09, 2021

NEW YORK – The Federal Reserve Bank of New York’s Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit. The Report shows that total household debt increased by $286 billion (1.9%) to $15.24 trillion in the third quarter of 2021. The total debt balance is now $1.1 trillion higher than at the end of 2019. It is also $890 billion higher than in Q3 2020, and $2.57 trillion higher, in nominal terms, than the $12.68 trillion peak seen in 2008. The Report is based on data from the New York Fed’s Consumer Credit Panel, a nationally representative random sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data.

Mortgage balances-the largest component of household debt-rose by $230 billion and stood at $10.67 trillion at the end of September. Credit card balances increased by $17 billion, the same size increase as in the second quarter. Despite the increase, credit card balances remain $123 billion lower than they had been at the end of 2019. Auto loan balances increased by $28 billion in the third quarter. Student loan balances grew by $14 billion, coinciding with the academic borrowing year. In total, non-housing balances grew by $61 billion, with gains across all debt types.

New extensions of installment credit remained near series highs for both mortgages and auto loans. Mortgage originations, which include mortgage refinances, stood at $1.1 trillion, declining slightly from the series high of $1.2 trillion reached in the second quarter of 2021. The volume of newly originated auto loans, which includes leases, was $199 billion, declining slightly from the second quarter’s series high of $202 billion. Aggregate limits on credit card accounts now stand at $3.96 trillion, increasing by $88 billion in the third quarter and reversing the decline seen in the first three quarters of the pandemic recession.

“We are again seeing credit card balances increase in the third quarter after a solid rise in the previous,” said Donghoon Lee, research officer at the New York Fed. “As pandemic relief efforts wind down, we are beginning to see the reversal of some of the credit card balance trends seen during the pandemic, namely reduced consumption and the paying down of balances. At the same time, as pandemic restrictions are lifted and consumption normalizes, credit card usage and balances are resuming their pre-pandemic trends, although from lower levels.”

Aggregate delinquency rates across all debt products have remained low and continued to decline since the beginning of the pandemic, attributable to a large degree to CARES Act support and lender concessions. The share of mortgages that transitioned to delinquency increased slightly to 0.41% from the second quarter’s record low, as the option to enter forbearance is no longer widely available. As of late September, 2.7% of outstanding debt was in some stage of delinquency, a 2.0 percentage point decrease from the fourth quarter of 2019, just before the COVID-19 pandemic hit the United States.

The New York Fed also issued an accompanying Liberty Street Economicsblog post that further examines credit card trends, including credit scores and balances. The blog takes a detailed look at increases in credit issuance and limits, and at which borrowers are being approved for credit in recent months, amid recovering consumption.

The Report includes a one-page summary of key takeaways and their supporting data points. Overarching trends from the Report’s summary include:

Housing Debt

  • There was $1.11 trillion in newly originated mortgage debt in Q3 2021, with 69% of it originated to borrowers with credit scores over 760. Two percent of newly originated mortgages were originated to subprime borrowers, a sharp contrast to the 12% average seen between 2003-2007.
  • New foreclosures remain very low between July 1 and September 30. Although the hold on foreclosures due to CARES was lifted on July 31st, additional available relief at the federal and local levels will forestall many foreclosure starts until 2022.
  • The share of mortgage balances 90+ days past due remained at 0.5%.

Student Loans

  • Outstanding student loan debt stood at $1.58 trillion in the third quarter, a $14 billion rise from 2021Q2.
  • About 5.3% of aggregate student debt was 90+ days delinquent or in default in Q3 2021. The lower level of student debt delinquency reflects a Department of Education decision to report current status on loans eligible for CARES Act forbearances.

Account Closings, Credit Inquiries and Collection Accounts

  • The number of credit inquiries within the past six months – an indicator of consumer credit demand -was at 122 million, a 1.3% increase from the previous quarter. The increases in the 2nd and 3rd quarters of 2021 came on the heels of six quarters of declining inquiries.
  • 217 million new accounts were opened in the third quarter, a return to the level seen in 2020Q1.

Household Debt and Credit Developments as of Q3 2021

CategoryQuarterly Change * (Billions $)Annual Change**
(Billions $)
Total As Of Q3 2021 (Trillions $)
Mortgage Debt(+) $230(+) $811$10.67
Home Equity Line Of Credit(-) $5(-) $45$0.32
Student Debt(+) $14(+) $38$1.58
Auto Debt(+) $28(+) $83$1.44
Credit Card Debt(+) $17(-) $3$0.80
Other(+) $2(+) $6$0.42
Total Debt(+) $286(+) $890$15.24

*Change from Q2 2021 to Q3 2021
** Change from Q3 2020 to Q3 2021

Flow into Serious Delinquency (90 days or more delinquent)

CategoryQ3 2020Q3 2021
Mortgage Debt1.0%0.3%
Home Equity Line Of Credit0.7%0.3%
Student Loan Debt4.4%1.1%
Auto Loan Debt2.1%1.6%
Credit Card Debt4.7%3.2%
Other4.1%2.8%
ALL1.7%0.7%

About the Report

The Federal Reserve Bank of New York’s Household Debt and Credit Report provides unique data and insight into the credit conditions and activity of U.S. consumers. Based on data from the New York Fed’s Consumer Credit Panel, a nationally representative sample drawn from anonymized Equifax credit data, the report provides a quarterly snapshot of household trends in borrowing and indebtedness, including data about mortgages, student loans, credit cards, auto loans and delinquencies. The report aims to help community groups, small businesses, state and local governments and the public to better understand, monitor and respond to trends in borrowing and indebtedness at the household level. Sections of the report are presented as interactive graphs on the New York Fed’s Household Debt and Credit Report web page and the full report is available for download.1 Rates represent annualized shares of balances transitioning into delinquency. Flow into serious delinquency is computed as the balances that have newly become at least 90 days late in the reference quarter divided by the balances that were current of less than 90 days past due in the previous quarter.

Contact
Mariah Measey
(347) 978 3071
Mariah.Measey@ny.frb.org

Shelley Pitterson
(212) 720-2552
shelley.pitterson@ny.frb.org

https://www.publicnow.com/view/E412E7C50E0CFC3F644BABCDFC85E2548AFC9266

Share on facebook
Facebook
Share on google
Google+
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on pinterest
Pinterest

Michigan license number:   DM-0016282 Available to the public and licensed in Michigan.

Section 13(1)  When a licensee establishes a debt management plan for a debtor, the licensee may charge and receive an initial fee of $50.00

Section 13(2)  A licensee shall attempt to obtain consent to participate in a debt management plan from at least 51%, in number or dollar amount, of the debtor’s creditors within 90 days after establishing the debt management plan. If the required consent is not actually received by the licensee, the licensee shall provide notice to the debtor of the lack of required consent and the debtor may, at its option, close the account. If the debtor decides to close the account, any unexpended funds shall be returned to the debtor or disbursed as directed by the debtor.

Sec. 14. (1) A contract between a licensee and debtor shall include all of the following:

(a) Each creditor to which payments will be made and the amount owed each creditor. A licensee may rely on records of the debtor and other information available to it to determine the amount owed to a creditor.

(b) The total amount of the licensee’s charges.

(c) The beginning and termination dates of the contract.

(d) The principal amount and approximate interest charges of the debtor’s obligations to be paid under the debt management plan.

(e) The name and address of the licensee and of the debtor.

(f) Any other provisions or disclosures that the director determines are necessary for the protection of the debtor and the proper conduct of business by a licensee.

Sec. 18. (1) In addition to the fee described in section 13(1), a licensee may charge a reasonable fee for providing debt management services under a debt management plan. The fee under this subsection shall not exceed 15% of the amount of the debt to be liquidated during the express term of the plan.

(2) A licensee may offer a debtor the option to purchase credit reports or educational materials and products, and charge a fee to the debtor if the debtor elects to purchase any of those items from the licensee.  Fees charged under this subsection are not subject to the 15% limitation on fees described in subsection (1).

(3) Except for a cancellation described in subsection (4), in the event of cancellation of or default in the performance of the contract by the debtor before its successful completion, a licensee may collect $25.00 in addition to any fees and charges of the licensee previously received by the licensee. This $25.00 fee is not subject to the 15% limitation on fees and charges under subsection (1).

(4) A contract is in effect when it is signed by the licensee and the debtor and the debtor has made a payment of any amount to the licensee. The debtor has the right to cancel the contract until 12 midnight of the third business day after the first day the contract is in effect by delivering written notice of cancellation to the licensee. A cancellation described in this section is not subject to, and a licensee shall not collect, the fee described in subsection (3).

(5) If a debtor fails to make a payment of any amount to a licensee within 60 days after the date a payment is due under a contract, the licensee may, in its discretion, cancel the debt management contract if it determines that the plan is no longer suitable for the debtor, the debtor fails to affirmatively communicate to the licensee the debtor’s desire to continue the plan, or the creditors of the debtor refuse to continue accepting payments under the plan.

(6) A licensee shall not contract for, receive, or charge a debtor an amount greater than authorized by this act. A person that violates this subsection, except as the result of an inadvertent clerical or computer error, shall return to the debtor the amount of the payments received from or on behalf of the debtor and not distributed to creditors, and, as a penalty, an amount equal to the amount overcharged.

530 W Allegan Street, 7th Floor
Lansing, MI  48909-7720
877-999-6442

Credit Advisor Logo 3

Schedule a Call Back

Credit Advisor Logo 3

Get Help Now!