US Household Debt Increased By $1T In 2021, The Most Since Before Financial Crisis In 2007

U.S. household debt is on the rise and it hit a peak in 2021 when Americans collectively took on $1 trillion-plus in debt — the highest since 2007 before the financial crisis.

The total amount of household debt held by consumers jumped from $14.6 trillion to $15.6 trillion, according to a report by the Federal Reserve Bank of New York. The increase was driven mostly by a huge increase in auto and home loans, the latter rising nearly 20 percent, the Wall Street Journal reported.  

“In all, 2021 saw historically high volumes of new extensions of installment credit for both mortgages and auto loans,” the report stated. “Mortgage originations, measured as appearances of new mortgage balances on consumer credit reports and which include refinances, were at $1 trillion in 2021Q4. In annual terms, mortgage origination volumes were at a historic high in 2021, with over $4.5 trillion in mortgages originated.”

Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin

Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?

Wilbert Van Der Klaauw, senior vice president at the New York Fed, echoed the report in a statement. “The aggregate balances of newly opened mortgage and auto loans sharply increased in 2021, corresponding to increases in home and car prices,” Der Klaauw said.

Credit card balances also increased in the fourth quarter of 2021 by $52 billion, according to the report. Despite the sharp quarterly increase, the Federal Bank said credit card balances are still $71 billion lower than they were at the end of 2019.

The hefty U.S. debt is reflective of a rebounding economy, according to University of Oregon professor Tim Duy, who is also the chief economist at SGH Macro Advisors, a research firm for hedge funds.

“The economy is recovering, incomes are up and households have the capacity to add debt,” Duy told Reuters.

Student loan debt stood at $1.58 trillion in the fourth quarter of 2021, according to the bank’s report, with delinquencies down due to the CARES Act forbearance relief. Delinquencies are expected to rise once the forbearance period ends after May 1, 2022.

PHOTO: In this Tuesday, Sept. 30, 2014 file photo, homeowner Helena Platt, left, of Atlanta, hands paperwork to Bank of America associate Mirella Gonzalez in an attempt to lower her monthly mortgage payment at a mortgage relief event by the Neighborhood Association Corporation of America, in Atlanta. U.S. household debt levels were mostly unchanged in the first three months of 2015, held back by tight mortgage credit standards and consumer reluctance to borrow heavily, the Federal Reserve Bank of New York said Tuesday, May 12, 2015. (AP Photo/David Goldman, File)

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button