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Household debt total passes $15 trillion for the first time

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In this illustration, you can see U.S. dollars banknotes.

Jose Luis Gonzalez | Illustration | Reuters

The New York Federal Reserve reports Tuesday that household debt surpassed $15 trillion in the third quarter. This was due to rising costs, which pushed up auto and home balances.

The mortgage market grew 2.2% to $10.7 trillion. Autos climbed $28 billion. This is part of a $286 billion debt increase that brought household debt to $15.24 trillion. It was a 1.9% jump, or $286 million, over the previous quarter.

Household debt growth was 6.2% higher than the previous year.

It covered July through September, a part of the time period when U.S. economic growth slowed to a 2% annualized paceThere are concerns about rising inflation and a slowing economy due to a pandemic.

According to the Fed report, housing debt rose with $1.11 trillion of newly originated mortgages. This was more than twice as much as it took from people with credit scores greater than 760. Only 2% came from subprime borrowers. According to Census Bureau data, the trend is evident in median housing prices rising 19.9% over the past quarter to greater than $444,000700.

The report shows that education loan debt rose from $14 billion to $1.58 Trillion as students returned to college. The report found that only 5.3% of loans had fallen into serious default. government forbearance program extends through Jan. 31, 2022

Credit card balances rose by $17billion to $800billion for the quarter, in spite of concerns about growth. This reverses a trend that started with the pandemic, when consumers reduced their revolving debt.

Donghoon Lee from the New York Fed, said that “As pandemic relief efforts begin to wind down, it is beginning to notice the reversal in some of the credit cards balance trends seen during pandemic,” which entails reduced consumption and payment down of balances. While pandemic restrictions have been lifted, consumption has normalized and credit card balances and usage are returning to pre-pandemic levels.

Officials stressed the fact that despite rising debt loads, rates of default are still low. This is due in large part because of increased savings and higher income.

The report stated that credit scores for mortgage loans “remain very high” despite a slight decline in the first days of the pandemic.

Auto loans that were newly originated totaled $199 Billion. That’s a slightly slower pace than the prior quarter and reflects higher loan amounts, rather than greater volume. According to Labor Department data, new auto prices increased 8.7% in September compared with a year earlier, while used vehicle and truck prices rose 24.4%.

Consumers see escalating inflation ahead.

According to a separate report released Monday by the New York Fed, inflation expectations were at 3.2% for the 3-month horizon. Prices are forecasted to increase 5.7% over one year. It is this highest rate in data since 2013.

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