U.S. households took on more debt in the third quarter than
since the bubble days of early 2008, and late payments continued to
decline, the Federal Reserve Bank of New York said in a new
With the housing market recovering and other types of consumer
debt rising, "it appears that households have crossed a turning
point" away from post-recession austerity, New York Fed economist
Donghoon Lee said in a statement.
Household debt was up 1.1 percent in the quarter that ended
Sept. 30, the strongest quarterly advance since the first quarter
of 2008, according to the New York Fed's latest
Household Debt and Credit
report, released Thursday morning. Outstanding debt for housing,
student loans, autos and credit cards reached $11.28 trillion,
about 11 percent below its pre-crisis peak five years ago.
The growth came without putting a strain on household finances,
as delinquencies continued to improve. Loan balances overdue
90-plus days fell to 5.3 percent of total debt, the lowest
delinquency rate since the third quarter of 2008.
Taking on more debt may not sound like a positive, but in a weak
economy with low inflation, economists take it as a good sign.
Households with both the financial strength and economic confidence
to borrow more -- and spend more -- will spur production and job
creation, putting to work more of the 11 million people still
"There are definitely signs that consumers are a little more
willing to borrow and lenders a little more willing to lend," said
Scott Hoyt, senior director of consumer economics at Moody's
Analytics. But calling it a turning point "might be overstating
things a bit." With mortgages making up the bulk of household debt,
he noted, the gradual decline in home foreclosures is bolstering
household loan balances.
Where the debt is
The third quarter marked the first "substantial increase" in
household debt since Americans began reducing their overall debt
load in 2008, according to the report. The Fed's look at household
balance sheets, drawn from about 40 million individuals' credit
- Credit card debt showed a relatively weak rise of $4 billion
during the quarter, about one-half of 1 percent. Ninety-day
delinquencies continued to improve, falling to 9.4 percent of
overall balances from 10 percent.
- Student loan debt gained $33 billion or about 3.3 percent,
and the delinquency rate increased, reaching 11.8 percent of
- Auto loans outstanding surged $31 billion, about 3.8 percent,
for their tenth-straight quarterly rise as new loans continued to
increase. Delinquencies declined somewhat, reaching 3.4
- Home mortgages were up less than 1 percent as the pace of new
loans fell slightly and foreclosures continued to take a bite out
of the total. However, the rate of homes going into foreclosure
declined to levels last seen in 2005.
- Home equity loans were the only component of household debt
to decline, falling about 1 percent.
The report painted a somewhat different picture of card debt
than the Federal Reserve Board's
monthly report on consumer credit
, which said revolving debt -- chiefly made up of credit card debt
-- fell for the fourth straight month in September. Unlike the New
York Fed's analysis, the monthly G.19 numbers are adjusted for
seasonal fluctuations, factoring out expected increases or
decreases. Banks bitten by card charge-offs during the recession
are more willing to make
than unsecured card loans to subprime borrowers.
The number of credit card accounts rose to 391 million, from 389
million in the previous quarter, the New York Fed said. The average
consumer credit score declined slightly, to 695 from 697. The
proportion of consumers with a debt in collection fell to 13.8
percent, from 14.6 percent, although the average amount rose by
$49, to $1,458.
Other sources point to credit cards' regaining popularity, at
least as a way of making new purchases. Credit cards stopped losing
ground to debit cards at the cash register in 2012 for the first
time in more than 20 years, the
Nilson Report announced
earlier this week. Credit cards accounted for 52.8 percent of card
spending in 2012, versus about 47.2 percent for debit cards, the
NY Fed: debt squeeze eases on households