Household debt report: Credit card balances highest since 2010

Auto loans surpass $1 trillion, mortgage market restricted to good-credit buyers

Balances on credit cards climbed to their highest mark in several years in the second quarter, according to a new government report, reinforcing other signs that card use is climbing as the economy strengthens.

Card debt reached $703 billion in the April-May-June period, according to the Federal Reserve Bank of New York, the highest point for that quarter since 2010. The number of card accounts was up as well, rising 5 million to 411 million, the highest total since 2009.

The New York Fed's quarterly Household Debt and Credit Report is drawn from consumers' credit report data. The rising balances reinforce the findings of the Federal Reserve's monthly G.19 consumer credit report, drawn from bank records, which also show card balances reaching new highs since 2010.

"New extensions of credit were robust in the second quarter," the New York Fed's report said. New mortgage originations increased $97 billion from the previous quarter to $466 billion, while auto loan originations reached a 10-year high of $119 billion. The surge in auto loans brought total auto loan debt over the $1 trillion mark.

New foreclosures dropped to the lowest mark in the study's 16-year look-back period, at 95,000 for the quarter, and overall loan delinquency rates improved.

Home lending is increasingly driven by borrowers with high credit scores, the report said, "as subprime lending has all but dried up." A new, in-depth look at mortgage originations showed that people with credit scores below 660 borrowed less than $150 billion per year for homes since 2010, down sharply from $650 billion in 2006.

"Persistently tight underwriting standards imply that new mortgages continue to be originated predominantly to the most creditworthy borrowers," economist Wilbert van der Klaauw said in a statement. Low foreclosure rates reflect not only the healthy economy, but also the higher creditworthiness of today's borrowers compared to those in past years.

Mortgages aren't the only loans that banks are being tightfisted with. Surveys of senior loan officers show that lending standards for credit cards are only gradually getting looser following the immense tightening that took place during the Great Recession.

In other findings from the New York Fed's report on household debt in the second quarter:

  • Total household debt was up a scant $2 billion from the first quarter, to $11.85 trillion, as outstanding balances on mortgages and home equity loans fell while card balances, auto loans and student loans rose.
  • Available loans on credit cards rose to $2.3 trillion, from $2.29 trillion, as card limits rose to $3.0 trillion, from $2.99 trillion.
  • The fraction of consumers with at least one debt in collection was 13.9 percent, up from 13.6 percent in the first quarter but improved from 14.3 percent in the second quarter of 2014. The average collection amount per person with debt in collection was $1,391, up from $1,376 in the first quarter.

See related: Households staggering under student loans

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Updated: 03-21-2019