USA household debt at highest level since 2008: Federal Reserve study

Posted February 17, 2017

The quarterly increase was driven by increases in every debt category, with strong growth in mortgage originations, auto loans, student loans at 2.4 percent and especially credit card debt at 4.3 percent.

Roughly 3.8% of the loans were delinquent at the end of the fourth quarter, which is up from 3.6% at the end of the third quarter, according to data on consumer debt collected by the Federal Reserve Bank of NY.

The ballooning debt figure is attributed mostly to rising reliance on home and auto loans, the report said.

It is true that the delinquents bring about possible losses to auto makers.

Last month, Ford Motor Credit Co. finance arm said it expected an uptick in loan losses from historically low levels following a rise in delinquencies and vehicle repossessions. To attract more customers, carmakers have to provide low interest loans which conversely affect the long-term goals of the company. This fall in quality has subsequently resulted in several impacts, which include the increase in the duration of auto loans to 84 months at times.

Analysts from Ford Motor Co state that in the fourth quarter of 2016, approximately $142 billion was generated in vehicle loans.

Moreover, of those subprime auto loans, the New York Fed said a full 75 percent originated with auto finance companies - a class of lender that, unlike banks and credit unions, has been loosening its credit standards since 2010.

Overall, auto debt hit $1.16 trillion, with a $93 billion rise over the previous year.

Auto loan delinquencies in the fourth quarter hit their highest level since the financial crisis, a report out Thursday revealed. This reflected an increase of around 6 million over the year.

Student loan debts too have gone up.

The average monthly auto payment in the fourth quarter rose above $500 for the first time, according to the credit-rating agency Experian.

Unlike during the previous economic collapse, the study notes, the soaring debt numbers are being driven by automobile and student loans rather than mortgages.