The New York Federal Reserve reported Tuesday that debt held by US households rose by 1.1% to $14.3 trillion during the first quarter. That’s $1.6 trillion higher than the previous peak of $12.7 trillion reached in 2008.
The report looked at consumer debt and credit data as of March 31. By that time, coronavirus shutdowns were already in place around much of the country. But given the month lag in reporting by the credit accounts used in the analysis, the report does not reflect the potential impact in the second half of March.
“It is critical to note that the latest report reflects a time when many of the economic effects of the COVID-19 pandemic were only starting to be felt,” said Andrew Haughwout, a senior vice president at the New York Fed. “We will continue to monitor these developments and the broader state of household balance sheets closely as key data are updated and the economic situation evolves.”
Before the pandemic hit, the unemployment rate was historically low and low interest rates helped encourage consumers to spend.
Mortgage balances, which are the largest component of household debt, rose $156 billion in the first quarter to $9.71 trillion. About 0.9% of mortgage balances became 30 or more days delinquent and about 75,000 homeowners had a new foreclosure notation added to their credit reports during the first quarter, the Fed reported. This is low by historical standards, and can serve as a baseline before the effects of the pandemic truly took hold.
One silver lining in the report: There was a $34 billion decline in credit card balances during the first quarter, that was larger than that seen in the same period last year. This gives a little more breathing room to financially strapped consumers who now may be turning to their credit cards to cover expenses.
Credit standards tightened slightly in the first quarter as the median credit score of new auto and mortgage borrowers rose compared to the final quarter of 2019.
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