Consumers Took on a Record-Breaking Amount of Debt Last Year

February 9, 2022

American consumers took on more debt last year than in any other year since before the 2008 financial crisis.

U.S. consumer debt at the end of 2021 totaled $15.6 trillion, according to data released Federal Reserve Bank of New York. That’s an increase of $1.02 trillion from the year before, the largest annual increase since 2007. The fourth quarter’s $333 billion increase was the largest ever in records going back to 2003.

The increase was driven largely by climbing prices for homes and automobiles, the loans for which make up the bulk of household debt. Home prices rose nearly 20% last year, and mortgage balances climbed by $890 billion for the year. Buyers appear to have been eager to borrow before rates increase, as mortgage originations for the year totaled more than $4.5 trillion, a new record.

Americans also racked up a record amount of credit card debt in the final three months of the year, adding $52 billion to that debt category in the fourth quarter, the largest quarterly increase on record.

Economists from the New York Fed said the sharp rise in consumer credit is no cause for alarm. Household wealth increased across all income levels during the pandemic, and delinquency rates for consumer loans remain near historic lows.

The increase does come just before a period in which the Fed is expected to aggressively raise interest rates in an effort to combat inflation, and a higher prime rate could have implications for household finances. For example, homeowners who borrowed at a low rate will likely be reticent to buy new homes as mortgage rates continue to climb, and consumers with high credit card balances could have trouble keeping up with payments as financing costs increase.

Read all Blog posts