- Consumer debt touches a new high, surpassing $17 trillion in Q1 2023, despite a significant decrease in home borrowing.
- The increase in total debt is largely attributed to new mortgage originations, which have plummeted to their lowest levels since Q2 2014.
- Despite rising interest rates, mortgage foreclosures remain low, while delinquency rates across all types of debt see an uptick.
In the cool early months of 2023, consumer debt decided to defy gravity and hit a record high, soaring past the daunting $17 trillion mark, even as home borrowing decided to chill and take a step back.
A mixed cocktail of borrowing, across all categories, was served at a staggering $17.05 trillion, an increase of about $150 billion or 0.9% in the first quarter, according to the barkeeper, also known as the New York Federal Reserve. This led to an increase in total debt of about $2.9 trillion from the pre-Covid era, which seems like a distant memory now.
What’s intriguing is that this increase strutted in, despite new mortgage originations, which include refinancings, barely scraping $323.5 billion, a low not seen since the heyday of the second quarter of 2014. Compared to the same time last year, we're talking about a 62% drop.
A flashback to the second quarter of 2021 takes us to the golden age of new home loans, hitting a peak at $1.22 trillion. Alas, interest rates decided to crash the party, and new home loans have been doing the walk of shame since. The 30-year mortgage rates have climbed their way up to 6.4%, thanks to a series of rate hikes by the central bank to combat inflation, which nudged the total mortgage debt to $12.04 trillion.
Despite the rising rates, mortgage foreclosures have decided to stay low-key. But delinquency rates aren’t as shy, increasing for all debt types, including credit cards and auto loans. Even student loan debt and auto loans decided to join the rising tide, edging higher to $1.6 trillion and $1.56 trillion respectively.
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