Bolstered by higher interest rates and inflation, total household debt rose to a record $16.2 trillion last quarter as credit card spending posted the biggest annual spike in more than 20 years, the New York Federal Reserve reported on Tuesday, warning that delinquencies are also starting to rise amid growing concerns about the broader economy.
Total household debt jumped by $312 billion, or 2%, to $16.15 trillion at the end of the second quarter—pushing balances about $2 trillion higher than at the end of 2019, before the Covid-19 pandemic, according to the NY Fed’s quarterly report on Household Debt.
In a statement, the New York Fed’s Joelle Scally attributed the swelling debt load to “robust increases” in mortgage, auto loan and credit card balances, as high inflation drives up the prices of goods and services at the highest rate in 40 years.
Though mortgage originations declined slightly in the second quarter—as higher interest rates curbed home-buying demand—mortgage balances fueled much of the overall debt increase, climbing by $207 billion to stand at $11.4 trillion at the end of June, the government said.
Meanwhile, credit card balances jumped by $46 billion, or 13%—representing the largest annual increase in more than 20 years and the second-biggest driver of overall debt last quarter.
As concerns mount over the state of the economy, Scally warned the Fed is seeing delinquencies “rising modestly” across all debt types and particularly among low-income borrowers, though she also notes household finances “appear to be in a strong position” overall.
In a potential sign that foreclosures are beginning to return to “more typical levels,” about 35,000 people saw new foreclosures on their credit reports, jumping more than 45% from the previous quarter, the government said; new quarterly foreclosures averaged about 100,000 before the pandemic but have since remained low due to various moratoria prohibiting the repossessions.