Total household debt fell for the first time since 2014 in the second quarter, including the largest drop in credit card balances seen in historical data.
In its quarterly report on household debt and credit, The Center for Microeconomic Data at the Federal Reserve Bank of New York showed total household debt fell $ 34 billion (0.2%) to $ 14,270 billion in the second quarter of 2020. This is the first decline since the second quarter of 2014 and the largest decrease since the second quarter of 2013.
Mortgage balances, the main component of household debt, increased $ 63 billion in the second quarter to $ 9.78 trillion. Mortgage originations, which include mortgage refinancings, reached $ 846 billion, the highest volume since the refinancing boom in 2013.
Reflecting the sharp decline in overall consumer spending due to the COVID-19 pandemic and associated social distancing orders, credit card balances fell sharply by $ 76 billion in the second quarter. This is the largest drop in card balances seen in data history. In total, non-housing balances (including credit cards, car loans, student loans, and other debt) recorded the largest decline in this report’s history, dropping $ 86 billion .
Aggregate delinquency rates fell significantly in the second quarter, reflecting the increased use of abstentions, which were provided for by the Coronavirus Aid, Relief and Economic Security Act (CARES). Note that withholding accounts are usually marked as up to date on consumer credit reports. The share of early delinquency mortgages that went ‘current’ fell to 61.1%, while there was a decline in the share of early delinquent mortgages whose status deteriorated over the course of time. of the second quarter of 2020.
The protections afforded to American consumers through the CARES Act have prevented large-scale delinquency from showing up on credit reports and hampering future access to credit, said Joelle Scally, administrator of the Center for Microeconomic Data from the New York Fed.
“However,” he added, “these temporary relief measures may also mask the very real financial challenges Americans may face as a result of the COVID-19 pandemic and the ensuing economic downturn.”
The report goes into more detail on housing and student debt as well as account closings, bankruptcy ratings and credit inquiries.