U.S. Borrowing Rises, Debt Falls In Q2

By Pete Rizzo, Editor (@pete_rizzo_)

The Federal Reserve Bank of New York revealed new data that suggests Americans were more confident about borrowing during the second quarter when it released its latest Household Debt and Credit Report on August 14.

The conclusion was supported by quarterly increases in big-ticket purchases such as housing originations and auto loan originations.

Auto loan originations climbed to $92 billion for the three-month period, rising to their highest level since 2007 on the largest quarterly gain in that time, according to the Fed. Mortgage loan originations increased to $589 billion, continuing an upswing that began in 2011.

“Although overall debt declined in the second quarter, households did increase non-housing debt, led by rising auto loan balances,” Andrew Haughwout, vice president of the New York Fed, said in an August 14 statement. “Furthermore, households improved their overall delinquency rates for the seventh straight quarter, an encouraging sign going forward.”

Aggregate consumer debt dropped by $78 billion, or 0.7 percent, to $11.15 trillion for the second quarter. This was down from the peak of $12.68 trillion observed in the third quarter of 2013.

In this PYMNTS.com Data Point, we’ll break down the Fed’s results by category, so you can see how consumers improved their financial outlook, and examine the metrics that are holding back consumer spending.

Credit Card Spending

Balances on consumer credit card accounts increased by $8 billion to $668 billion during the third quarter after falling by $19 billion in the first quarter of 2013. The 90-day delinquency rate on credit balances declined to 10 percent, down from the 10.2 percent observed in the organization’s previous report.

Notably, statistics suggest that this confidence has yet to translate into a willingness to sign up for new credit offers. The number of credit inquiries rose by just 1 million from the first quarter to 159 million.

Mortgage Loans

Mortgage loan debt fell to $7.84 trillion, down from $7.93 trillion in the first quarter, while delinquency rates declined to 7.6 percent from 8.1 percent.

The Wall Street Journal suggested that this decline was likely due to the amount of debt tied to existing home loans, and that write-offs from foreclosures and increased home sales contributed to most of the metric’s improvement.

Student Loans

Student debt increased to $994 billion, an $8 billion increase from the first quarter’s total of $986 billion, though gains were made in this category.

Ninety-day delinquency rates in this category improved, falling to 10.9 percent from the 11.2 percent observed the previous quarter, and the 11.7 percent seen in the fourth quarter of 2012.

Auto Loans

Auto loans continued an impressive growth streak this quarter. Over the last nine quarters, the Federal Reserve Bank of New York indicates auto loan debt has surged by $108 billion, passing the $800 billion mark for the first time since before the Great Recession.

Further, 90-day auto loan delinquencies fell to 3.6 percent, down from the 3.9 percent observed in the previous study. This was the lowest total observed by the Fed in five years.

For more insights and statistics, download a full copy of the report here.

The post U.S. Borrowing Rises, Debt Falls In Q2 appeared first on PYMNTS.com.