Americans' Collective Debt is $15 Trillion, After Rising the Most in 14 Years

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Locked down at home but still on the clock, the pandemic was a great time for many Americans to stockpile cash. Now they've embarked on a follow-up project: building a tower of debt.

The Federal Reserve said Tuesday that America's household debt — aka the country's collective IOU — ballooned by $313 billion in the second quarter, the biggest dollar amount in 14 years. Unsurprisingly, Americans now owe more than ever: $15 trillion, or ​​$812 billion more than at the end of 2019.

How Can I Ever Repay You?

The Fed has created a launching pad for Americans to take on debt by keeping borrowing rates at historic lows. That's made for a sweltering hot housing market that saw mortgage balances — which account for $10.4 trillion of all household debt — rise $282 billion in the second quarter.

44% of all outstanding home balances originated this year, but housing isn't the only area where debt instruments are in overdrive:

  • Non-housing debt balances were up $44 billion in the second quarter. Of those, credit card balances increased $17 billion and auto loans jumped $33 billion.
  • The one category that did fall was student loan debt, which decreased $14 billion thanks to forbearance programs designed to stave off delinquencies. But total student loan debt still rests at nearly $1.6 trillion.

Debt-Rich: With all the money being thrown around, more capital than ever is making its way to wealthy borrowers. Over 71% of mortgage originations in the second quarter went to those with a credit score of at least 760, just shy of the 73% record set last quarter. Meanwhile, the Fed said Monday that standards for other kinds of credit, like auto loans and credit cards, are loosening.

Homeward Outbound: There's also the question of what the expiration of pandemic-era programs will entail for mortgage-holders trying to stay afloat. According to the Fed, there are two million mortgage borrowers who previously had payments paused, but are now vulnerable to delinquency and potentially foreclosure.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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