Americans increased their borrowing this summer, taking out
more new mortgages for the first time in over a year while adding to their car,
credit-card and education loans. For the most part, consumers are taking on new
loans carefully, yet late payments on one fast-growing category of debt—student
loans—are worsening, new figures from the Federal Reserve Bank of New York
show.
Household debt—including mortgages, credit cards, auto loans
and student loans—rose $78 billion between July and September to $11.7
trillion. Debt levels had fallen the previous quarter and remain $1 trillion
below their peak in 2008.
The numbers suggest Americans are gradually borrowing again
after years of shedding debt. With cheaper gasoline and easier-to-find jobs,
more borrowing could fuel holiday shopping and give more succor to the economy,
which depends on consumers for roughly two-thirds of its activity.
New mortgage loans, including refinanced mortgages, edged up
to $337 billion after four straight quarters of declines, the Fed’s figures
showed. Total mortgage balances—the biggest part of Americans’ debt—climbed $35
billion to $8.1 trillion.
While historically low, the uptick in new mortgages is a
welcome sign for the nation’s housing market, which has struggled even as the
economy comes off its best six-month stretch of growth since 2003. In addition,
auto lenders made $105 billion in new loans, the highest level in nearly a
decade. Outstanding student loans rose $8 billion to $1.1 trillion.
Credit-card balances, which have generally been slow to
rise, are now slightly above year-ago levels. Separate data released Tuesday
showed the U.S. economy grew at an annualized clip of 3.9% last quarter, more
than previously estimated—thanks partly to upwardly revised estimates of
consumer spending.
Even amid the uptick in borrowing, Americans seem to be
mindful of not biting off more than they can chew. And they are doing better paying
their debts on time, both good signs given the borrowing binge before the
financial crisis.
The share of mortgage debt seriously overdue dropped to 3.2%
last quarter, from 3.4% in the second quarter. The share of seriously
delinquent auto-loan debt also dropped, to 3.1%, from 3.3%—despite growing
concerns about lax auto lending. Serious credit-card delinquencies eased, too.
One glaring problem in America’s debt picture is student
loans: The share of student-loan debt 90 or more days overdue rose last quarter
to 11.1%, from 10.9%—and even this figure understates the problem, the New York
Fed says.
Growing student-loan burdens are troubling to economists and
policy makers because they could keep, or at least delay, younger Americans
from saving or spending in other ways, such as buying homes. And unlike other
types of consumer debt, education loans are hard to discharge in
bankruptcy—making them more of a potential drag on a borrower’s consumer
behavior.
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