NEW YORK–The total amount of debt held by American households climbed in 2016 by the most in a decade and is approaching an all-time peak, according to a new report from the Federal Reserve Bank of New York.
Driven by steady increases in credit card debt, auto and student loans, as well as a big increase in mortgage debt during the fourth quarter of 2016, total household debt climbed by $226 billion in the final three months of 2016 and is now just $99 billion shy of the all-time peak of $12.7 trillion set in the third quarter of 2008, according to the Fed data. That was just prior to the onset of the financial crisis. The New York Fed is estimating that debt is highly likely to set a new record in 2017.
“Debt held by Americans is approaching its previous peak, yet its composition today is vastly different as the growth in balances has been driven by non-housing debt,” said Wilbert van der Klaauw, an economist at the New York Fed, in a statement.
Worth noting, however, is that the New York Fed doesn’t adjust its figures for inflation. When measured against the broader economy, total household borrowing today is 67% of nominal gross domestic product, compared with about 85% in 2008, the Fed said.
While debt is up across the board, the biggest drivers of growth in household debt over the past 10 years has been student loans and auto loans, the New York Fed said.
But the biggest force driving household debts higher over the past decade has come from the rise of student loans and auto loans. Student debit, for instance, stood at $1.3 trillion in the fourth quarter.
As CUToday.info reported here, credit card debt also recently topped $1 trillion.