Nonhousing debt balances increased by a total of $67 billion, driven mostly by the uptick in auto loan balances.
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The second quarter’s decline occurred even as Americans took out more new mortgages, either to refinance old loans or purchase homes.
Credit card balances increased by $19 billion in the second quarter to $703 billion. A total of about $73 billion in auto-loan-backed bonds have been sold this year, according to Bank of America Corp., which expects full-year bond sales from vehicle finance firms to reach $125 billion, compared with $101 billion in 2014. As of the end of the second quarter, 5.6 percent of outstanding debt was in some stage of delinquency.
In fact, student loan debt may be even more of a drag on affected households and the economy than the delinquency rate alone indicates.
The $55 billion decrease in mortgage debt, combined with falling delinquencies and foreclosures, reflects a housing market recovering from the subprime crisis and lenders demanding clean credit, according to the New York Fed.
Americans are paying down mortgage debt at roughly the same pace as new loans are made, evidence that homeowners remain wary of housing-related debt. It’s still very hard for those without sterling credit to get mortgages. On a quarterly basis, auto loan growth is the highest in a decade, the Fed said.
“Persistently tight underwriting standards imply that new mortgages continue to be originated predominantly to the most creditworthy borrowers”, said Wilbert van der Klaauw, senior vice president at the regional Fed bank. Auto loans climbed to new highs while mortgage lending. Borrowers more than 90-days behind on their mortgage fell to just 2.5% in the second quarter, the lowest since 2007. About 95,000 individuals had a new foreclosure notation added to their credit reports, marking a new low in data going back to 1999. Last month, Ford reported $1.9 billion in net profit during the quarter, a 44% increase from the same quarter a year ago, with strength in the U.S. offsetting weakness in China and Europe.
Student loan debt, which has doubled over the past eight years, was $1.2 trillion as of June 30. The figures aren’t seasonally adjusted.
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The report is based on data from the New York Fed’s Consumer Credit Panel, a nationally representative sample drawn from Equifax credit data.
