Household debt rises to $ 14.6 trillion due to record rise in mortgages

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People count money at Macy’s Herald Square store in New York City.

Andrew Kelly | Reuters

Total consumer debt reached nearly $ 14.6 trillion by the end of 2020, driven by a record rise in mortgage lending in the burning housing market, according to a Federal Reserve report on Wednesday.

Debt rose 1.4% in the past three months, to an additional $ 206 billion, as households benefited from low interest rates and continued fiscal and monetary stimulus.

Mortgage debt topped $ 10 trillion for the first time and grew at the fastest pace in the fourth quarter since 2006. The quarterly increase of $ 182 billion culminated in a year in which homeowners took advantage of low rates to refinance and city dwellers have moved to the suburbs amid the continued change brought about during the Covid-19 pandemic.

In 2020, total household debt increased by $ 414 billion as a result of the shift from borrowing to auto and education financing and mortgages. The year saw mortgage debt increase by $ 486 billion, while student loans increased by just $ 47 billion to $ 1.56 trillion and auto debt increased by $ 43 billion to $ 1.37 trillion. Credit card debt declined for the year by $ 108 billion to $ 820 billion.

Borrowers have experienced two main positive winds over the past year – low interest rates and forbearance guidelines that have brought delinquencies under control.

Mortgage debt considered “serious delinquency”, or 90 more days in arrears, was 0.65% in the fourth quarter of 2020, against 1.1% a year earlier. Student loan debt, which was particularly targeted by forbearance, fell from a serious delinquency rate of 9.21% in the fourth quarter of 2019 to 2.76% a year later.

The severe default rate for all debt fell from 2.36% to 1.25% for the period.

“It will be interesting to see if households maintain these high rates of home purchase and refinancing until 2021 and more generally how households adjust their balance sheets depending, in part, on whether and for how long. time forbearances on payments on federally guaranteed mortgages and student loans, “New York Fed economists said in a blog post accompanying the release.

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