Washington: American households borrowed another $601 billion (Dh2.2 trillion) in 2019, the largest yearly gain since 2007, just before the global financial crisis, the New York Federal Reserve Bank said Tuesday.
Fuelled by rising mortgage debt as homebuyers continued to take advantage of low interest rates, the increase last year brought total household debt to a new record high, surpassing the previous peak reached in 2008 just before the market crash, according to the report.
Following the 22nd straight quarter of growth, American household debt swelled to $14.15 trillion by the end of 2019, the New York Fed said in its quarterly report.
In the final three months of the year, new home loans jumped to their highest volume since the fourth quarter of 2005, while credit cards and auto loans also added to the increase.
The Federal Reserve cut the benchmark lending rate three times last year to try to shore up economic growth, with the last cut in October taking it down to 1.5-1.75 per cent, which continued to bring homebuyers into the market.
But the debt load is taking its toll on some households, and the New York Fed warned that more and more credit card borrowers — particularly young people — were falling behind on their payments.
About 4.3 per cent of credit card holders between the ages of 18 and 29 years old were delinquent in 2019, while the rate was 2.8 per cent for people between the ages of 30 and 39, the report said.
“Younger borrowers, who are disproportionately likely to have credit cards and student loans as their primary form of debt, struggle more than others with on-time repayment,” New York Fed researchers said in a blog post on the report.
The data showed bankruptcies crept slightly upwards to 202,000 in the fourth quarter from 195,000 in the same period in 2018, even as the job market and wages remained healthy.
Student loans meanwhile rose by $51 billion to $1.51 trillion, with 9.21 per cent past due by 90 days or more, the bank said.