Broker Check

US Household Debt Nears Record Highs

| March 03, 2017

The New York Federal Reserve recently released data showing that US household debt is near a record high. Total household debt hit $12.58 trillion in the fourth quarter 2016. This level is just $460 billion, or 0.8%, below the previous record from 2008.

However, the type of debt held by households is quite different from 2008. Back then, mortgage debt was a larger percentage of total household debts, while other forms of debt such as consumer debt was a smaller percentage. This may be partly due to households using home equity to refinance other debt prior to 2008.

Today, mortgage debt is below its peak levels. Consumer debt, though, is at records highs. Auto debt has increased to $1.16 trillion while student loan debt has increased to $1.31 trillion. Of course, the collateral backing these debts is generally less valuable than that backing mortgage debt, making these forms of debt somewhat more risky for lenders.

Currently, 4.8% of household debt is in some stage of delinquency, which is an average delinquency rate by historical standards. However, should debt continue to increase and the economy falter, delinquency rates could rise quickly.