Household Debt Surges at Fastest Pace in 15 Years

November 18, 2022

U.S. households racked up debt at the fastest pace in 15 years during the third quarter, as rising interest rates pushed up mortgage balances and consumers turned to credit cards in the face of rampant inflation.

Total household debt increased by $351 billion in the months between July and September, according to a report from the New York Fed. That is the largest nominal quarterly increase since 2007, and brings the household debt to a record high of $16.5 trillion, an increase of 2.2% from the previous quarter and an annual increase of 8.3%.

The bulk of that increase in debt came from mortgage balances, which rose $1 trillion from a year ago to $11.7 trillion, and credit card debt, which climbed to $930 billion.

Credit card balances have increased more than 15% since the third quarter of 2021, which is the largest annual increase in more than 20 years, according to the New York Fed. Researchers at the New York Fed say that the increased debt load reflects a combination of higher prices and strong consumer demand, which has yet to be eroded by inflation and higher interest rates.

Mortgage balances continued to climb higher amid a rapid increase in interest rates that has seen 30-year mortgage rates more than double over the past year. Total mortgage debt climbed, even though mortgage originations fell sharply during the quarter, dropping nearly 17% to $633 billion.

The higher balances have led to an uptick in delinquencies, but the researchers note that “they remain low by historical standards and suggest consumers are managing their finances through the period of increasing prices.”

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