U.S. household debt at highest level since 2008: Federal Reserve study

Andrew Cummings
February 17, 2017

About $23.27 billion in loans were 30 days or more late as of December 31 - a whopping 14 percent increase from the year earlier and the most since the $23.46 billion in the third quarter of 2008, according to the New York Federal Reserve.

Rising debt hints that banks are extending more credit.

"Greater access to auto loans for non-prime consumers suggests that lenders have made deliberate decisions to accept more risk from non-prime loans in their portfolio", said Jason Laky, TransUnion's automotive and consumer lending business leader, while discussing the market forecast of the agency in 2017.


Auto loans delinquent by 30 days or more grew to $23.27 billion, the most since $23.46 billion in the third quarter of 2008.

Delinquency is a predictor on possible losses for carmakers, which often make low interest loans to attract buyers. This fall in quality has subsequently resulted in several impacts, which include the increase in the duration of auto loans to 84 months at times. Note on the following chart how the trend line steepened in the 2000s and then steepened again in this decade, with a sudden and unexpected pop in 2015 and early 2016, even as the current recovery entered its 8th year.

The increase in late loan payments coincided with drivers loading up on debt to buy the latest vehicle, trunk and SUV models, fueling expectations for record auto sales in 2017. According to The New York Federal Reserve, the total number of vehicle loans increased to the highest ever of 106 million in the fourth quarter.


However, the increase in recent years has been driven by student debt and auto loans, rather than by the mortgages that were central to the 2008 crisis. This reflected an increase of around 6 million over the year. The agency has predicted that the delinquency rates shall continue to increase. Dollar amounts rose in each category in 2016's fourth quarter.

Credit card debts rose by $32 billion to hit $779 billion.

At the end of 2016, 4.8% of debts were delinquent, compared to 8.5% of total household debt in the third quarter of 2008.


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