The total amount of household debt carried by American consumers increased by $601 billion in 2019, according to recent figures from the Federal Reserve. This increase represents the largest annual jump seen since before the 2007 financial crisis, according to officials at the New York Federal Reserve.
While total household debt has increased by $601 billion, the total amount outstanding has now reached $14 trillion for the first time. The last time the nation has seen national household debt grow this much was in 2007. At the time, household debt jumped by just over $1 trillion.
Many are questioning what has driven this large increase. According to economists, this growth is likely due to a large increase in mortgage debt balances. Mortgage balances have gone up $433 billion, another large gain not seen since 2007, just before the housing crisis.
It is now estimated that mortgage debt accounts for $9.95 billion of the $14 trillion balance. Behind that are car loans and credit card debt, which increased by $57 billion in 2019.
Even more concerning is the fact that credit cards have again surpassed student loans as the most common form of debt carried by younger consumers. Several years after the 2007 financial crisis, student loan debt balances were higher than credit cards. The number of delinquencies reported among credit card borrowers has increased consistently since 2016. Of those consumers experiencing delinquencies, younger borrowers by far constitute the larger portion.
Lenders are cracking down on their standards for many types of debt, as well. The median credit score for borrowers taking out mortgages or car loans has increased somewhat in the fourth quarter of 2019.
In the fourth quarter of 2019, the increase in mortgage originations was at $752 billion, which is the highest quarterly increase seen since 2005. However, given the fact that interest rates are low, many homeowners are refinancing their current mortgage obligations, which could be why this increase was so significant.
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