Consumer Debt Reaches New All-Time High, Despite Slowing Mortgage Demand

May 29, 2023

Consumer debt in the U.S. hit a new high in the first quarter of 2023, topping $17 trillion, even as home borrowing saw a steep decline.

The total for borrowing across all categories hit $17.05 trillion, an increase of nearly $150 billion, or 0.9% during the period between Janaury and March, the New York Federal Reserve reports. Total consumer debt has grown by roughly $2.9 trillion since the pre-pandemic era.

The increase comes in spite of the massive dropoff in mortgage demand, including new originations and refinancing. Mortgages for the first quarter totaled just $323.5 billion, the lowest level since the second quarter of 2014. The total is a 35% decline from the fourth quarter of 2022 and a staggering 62% below the same period last year.

Mortgage originations peaked at $1.22 trillion in the second quarter of 2021, amid the pandemic-era housing boom and ultra-low mortgage rates. At the start of 2021, the average 30-year mortgage rate was about 2.65%, but a series of interest rate hikes from the Federal Reserve has seen mortgage rates climb as high as 7% in recent months. 

Notably, credit card balances were flat during the first quarter, holding at $986 million. However, this is the first time in more than 20 years that there hasn’t been an outright decline in credit card debt during the first quarter, NY Fed researchers said. Typically, consumers pull back on credit card spending after the holidays and pay down some debt with the help of tax refunds. Analysts have taken this as a sign of consumers struggling amid higher inflation and resorting to credit to maintain their spending levels, which bodes poorly for consumer spending in coming months.

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