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posted on 13 February 2018

4Q2017 Report on Household Debt and Credit: Household Debt Is Now 17.9% Above the 2013Q2 Trough

from the New York Fed

Aggregate household debt balances increased in the fourth quarter of 2017, for the 14th consecutive quarter, and are now $473 billion higher than the previous (2008Q3) peak of $12.68 trillion. As of December 31, 2017, total household indebtedness was $13.15 trillion, a $193 billion (1.5%) increase from the third quarter of 2017. Overall household debt is now 17.9% above the 2013Q2 trough.

Mortgage balances, the largest component of household debt, increased substantially during the fourth quarter. Mortgage balances shown on consumer credit reports on December 31 stood at $8.88 trillion, an increase of $139 billion from the third quarter of 2017. Balances on home equity lines of credit (HELOC) declined again, by $4 billion and now stand at $444 billion. Non-housing balances, which have been increasing steadily for nearly 6 years overall, saw a $58 billion increase in the fourth quarter. Auto loans grew by $8 billion and credit card balances increased by $26 billion, while student loans saw a $21 billion increase.

New extensions of credit declined slightly in the fourth quarter. Mortgage originations, which we measure as appearances of new mortgage balances on consumer credit reports and which include refinanced mortgages, were at $452 billion, down from $479 billion in the third quarter. There were $137 billion in auto loan originations in the fourth quarter of 2017, a small decline from 2017Q3 but making 2017 auto loan origination volume the highest year observed in our data. The aggregate credit card limit rose for the 20th consecutive quarter, with a 1.0% increase.

The median credit score of newly originating borrowers declined slightly for mortgages, to 755 from 760. For auto loan originators, the median score increased to 707 from 705.

Aggregate delinquency rates improved in the fourth quarter of 2017. As of December 31, 4.7% of outstanding debt was in some stage of delinquency. Of the $619 billion of debt that is delinquent, $406 billion is seriously delinquent (at least 90 days late or "severely derogatory"). The flow into 90+ days delinquency for credit card balances has been increasing notably from the last year and the flow into 90+ days delinquency for auto loan balances has been slowly increasing since 2012.

About 200,000 consumers had a bankruptcy notation added to their credit reports in 2017Q4, an improvement over the same quarter last year.

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Housing Debt

  • There was $452 billion in newly originated mortgage debt this quarter.
  • Mortgage delinquencies continued to improve, with 1.3% of mortgage balances 90 or more days delinquent in 2017Q4.
  • Delinquency transition rates for current mortgage balances improved, with 0.9% of current balances transitioning to delinquency. There was an improvement in the transition rates of mortgages in early delinquency, of which 15% transitioned to 90+ days delinquent, compared to 16.2% in the previous quarter. The share of mortgages in early delinquency that "cured" improved to 35.9%, from 30.9% in the 3rd quarter.
  • About 70,000 individuals had a new foreclosure notation added to their credit reports between October 1 and December 31, roughly unchanged from the previous quarter and the lowest observed in our data.

Student Loans, Credit Cards, and Auto Loans

  • Outstanding student loan debt grew, and stood at $1.38 trillion as of December 31, 2017.
  • 11.0% of aggregate student loan debt was 90+ days delinquent or in default in 2017Q4, a small decline from the previous quarter.2
  • Auto loan balances increased by $8 billion in the fourth quarter, continuing their 6-year upward trend. Auto loan delinquency rates increased slightly, with 4.1% of auto loan balances 90 or more days delinquent on December 31.
  • Credit card balances increased by $26 billion.

Credit Inquiries

  • The number of credit inquiries within the past six months - an indicator of consumer credit demand - declined in the fourth quarter.

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