Economy
Household Debt Trends Improve in Q1 2016, With Bankruptcies Way Down
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The Federal Reserve Bank of New York has released its report measuring household debt and credit developments in the first quarter of 2016. Though it is a regional Fed bank issuing the report, the data have a nationwide focus. It turns out that the total levels of household debt balances rose during the first quarter of 2016.
As of March 31, 2016, total household debt was $12.25 trillion. This is a gain of $136 billion, or 1.1%, from the fourth quarter of 2015. One interesting note is that the overall level of household debt is actually still 3.3% below its peak of $12.68 trillion — from the third quarter of 2008!
As you might suspect, mortgage balances make up the largest component of household debt. This debt load increased in the first quarter by $120 billion, up to $8.37 trillion.
Home equity was down very modestly. Home equity lines of credit (HELOC) fell by $2 billion to $485 billion.
Non-housing debt balances rose somewhat in the first quarter. Gains of $7 billion were seen in auto loans and $29 billion in student loans. These two gains were offset by a $21 billion decline in credit card balances. As a reminder, credit card balances often rise throughout the fourth quarter of each year and tend to be paid off in the first quarter of the year — and that first quarter is the one when retailers often wonder why they are even open.
Outstanding student loan balances increased by some $29 billion, which now takes the total student loan debt to $1.26 trillion as of March 31, 2016. On the delinquency count on student loans, the New York Fed showed that 11.0% of aggregate student loan debt was delinquent by 90 days or more (includes student debt in default). That 90 day or more count is actually an improvement from the 11.5% rate seen in the fourth quarter of 2015.
Here is a mini view of origination of new debt:
The distribution of the credit scores of new mortgage borrowers rose, with the median credit score for newly originated mortgages increasing slightly. Some 58% of all new mortgage dollars being loaned were made to those with credit scores over 760.
There was some good news on loan delinquencies. Overall delinquency rates improved to a level of 5.0% of the outstanding debt being recorded in some stage of delinquency.
Of the $613 billion of debt that is delinquent, some $436 billion is seriously delinquent (90 days or over). The Fed showed that some 207,000 consumers had a bankruptcy notation added to their credit reports in the first quarter of 2016, which is 19% lower than a year earlier.
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