The fastest growth of US household debt in years

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The fastest growth of US household debt in years

The United States Federal Reserve was pleased to launch a quarterly report on the fastest growth of household debt in years during the spring, driven by a surge in credit card spending and home purchases, the New York Federal Reserve said in a statement released Tuesday.

Between April and June, total debt balances soared by $313 billion the largest treasury increase since 2007 and the largest percentage increase since 2014. At the end of June, American consumers held about $14.96 trillion in debt, the highest in its history.

It's approximately $2.28 trillion higher than the previous peak of $12.68 trillion in the third quarter of 2008, in the midst of the Great Recession, and about $812 billion more than what was owed to the government before the pandemic hit.

We have seen a very robust pace of the origination over the last four quarters with rebounding extensions of credit for mortgages and auto loans combined with new demand for credit card borrowing, Joelle Scally, an administrator of the Center for Microeconomic Data at the New York Fed, said in a statement.

Mortgage balances, the largest component of household debt in the U.S. were doubled to $10.4 trillion in the second quarter by $282 billion. The bulk of the increase stemmed from mortgage originations as the Federal Reserve held in the near zero interbank lending rate, leading to ultra-low borrowing rates and a spike in refinancing among homeowners.

Over the past four quarters, mortgage originations hit a record high, totaling close to $4.6 trillion or roughly 44% of all outstanding home balances.

Credit card balances rose meanwhile in the second well below the $140 billion level at the end of 2019, when the virus shut down broad swaths of the nation's economy. Auto loan balances jumped by $33 billion.

The rise in credit card and auto loan balances was offset by a decline in student loan balances, the only category that declined last quarter. Student loan balances sunk by $1.57 trillion over three months, fall to $14 billion last month.

GOVERNMENT OFFICIALS DISTRIBUTED JUST 6.5% OF AVAILABLE RENTAL AID IN FIRST HALF OF 2021.

The drop largely reflects the relief program introduced by Congress in March 2020 that has frozen student loan payments until September 30. Payments are slated to resume on October 1 after a 19 month grace period that benefitted roughly 19 million Americans.