NEW YORK–The economy may be said to be strengthening, but at the same time U.S. household debt is hitting record highs.
The news comes at the same time, as CUToday.info reported here, that new research has found half of all CU members say they are struggling financially.
According to the Federal Reserve Bank of New York, household debt totaled $13 trillion in the third quarter of 2017, an increase of 0.9% from Q2. The new numbers mark the 13th straight quarterly increase (not adjusted for inflation) of household debt. While delinquencies remain relatively flat, that isn’t the case with auto loans.
Overall, the $13 trillion of household debt is $280 billion above its 2008 third quarter peak, and 16.2% above the 2013 second quarter figure, according to the New York Fed. Mortgage balances represent the biggest piece of household debt at $8.7 trillion, 1.4% of which is 90+ days or more delinquent.
Student loan debt at the end of Q3 stood at $1.4 trillion, with 11.2% 90+ days delinquent. Credit card balances were up by $24 billion, with 4.6% 90+ days delinquent.
But its auto loans were the delinquency figures continue to rise. The New York Fed reported that at the end of Q2 auto loan balances had increased by $24 billion to $1.2 trillion, with 90+ day delinquencies increasing by 4%.
The New York Fed said it estimates 23 million consumers hold subprime auto loans, which are based on a credit score below 620. Approximately 20% of new car loan originations are made to sub-prime borrowers, the Fed said.
The figures show a contrast in the delinquency rate between bank and credit union lenders compared with non-bank lenders.
Auto loans from traditional bank lenders had a 4.4% 90+ days delinquency rate, and have been improving since the financial crisis, the Fed said. But it noted auto loans from non-bank lenders have been more than double those of traditional bank lenders – at about 9.7%.
In aggregate, there are approximately $435-billion of auto loans outstanding that were made to consumers with a credit score below 660, according to the New York Fed.
In all, about 6.3-million Americans are 90 days or later on auto loan payments, an increase of about 400,000 over one year earlier.