US household debt increased by $1 trillion in 2021, the most since 2007

FILE PHOTO – New cars go on sale at a Chevrolet dealership in National City, California, U.S., June 30, 2017. REUTERS/Mike Blake

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Feb 8 (Reuters) – U.S. consumers increased their debt loads at the fastest rate in 14 years in 2021 as they borrowed more to afford increasingly expensive homes, cars and other goods , according to a report published Tuesday by the New York Times. York Federal Reserve.

Total household debt rose by $1 trillion last year, marking the largest increase in overall debt since 2007, according to the New York Fed’s quarterly report on household debt and credit. The total debt balance is now $1.4 trillion higher than it was at the end of 2019.

“Aggregate balances of newly opened mortgages and auto loans have increased sharply in 2021, matching the increase in house and car prices,” Wilbert Van Der Klaauw, senior vice president of the New York Fed, said in a statement. a statement.

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More than $4.5 trillion in mortgages were originated in 2021, hitting an all-time high for the database, which dates back to 1999. Mortgage balances rose $258 billion in the fourth quarter to 10.93 trillions of dollars at the end of December.

Auto loans have returned to pre-pandemic trends, but loan amounts have increased in response to rising car prices, New York Fed researchers said. “As car prices soared, buyers borrowed more to finance the extra cost,” the researchers wrote in a blog post published Tuesday.

In a sign that consumers are returning to their pre-pandemic spending habits, credit card balances also increased by $52 billion in the fourth quarter. It’s the biggest quarterly increase in the data’s history, but credit card balances are still $71 billion lower than they were at the end of 2019.

Credit card use typically increases in the fourth quarter when people shop for vacation, but the increase could also reflect higher prices for goods and services, the researchers said.

Households have so far been able to absorb the higher indebtedness and delinquencies remain low, thanks in part to savings accumulated earlier in the pandemic and forbearance programs, the researchers said. But it will be important to monitor the situation of some borrowers after they have to resume paying off their student debt in a few months, New York Fed researchers said.

(This story corrects the first year of data for the report to 1999 from 2000 in the fourth paragraph)

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Reporting by Jonnelle Marte; Editing by Howard Goller

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