According to a recent report by the Federal Reserve Bank of New York, US consumer debt has exceeded $17 trillion for the first time ever. The report reveals that Americans are defaulting on credit card and car loans at rates seen during the coronavirus pandemic or higher.
The total household debt in Q1 of 2023 rose by $148 billion, or 0.9%, to reach $17.05 trillion. The report further states that debt balances were $2.9 trillion higher than at the end of 2019, before the pandemic-triggered recession. The delinquency transition rate for credit cards and auto loans increased by 0.6 and 0.2 percentage points, respectively, approaching or surpassing their pre-pandemic levels.
Mortgage balances rose modestly by $121 billion and stood at $12.04 trillion at the end of March, the report added. However, student loan balances slightly increased to $1.6 trillion, and other balances, including retail cards and other consumer loans, increased by $5 billion.
While credit card balances were flat in the first quarter, standing at $986 billion, auto loan balances increased by $10 billion in the first quarter, bucking the typical trend of balance declines in first quarters.
These findings are concerning as the US Treasury Department has already begun taking measures to prevent a default on government debt, with Congress heading towards a high-stakes clash between Democrats and Republicans over raising the borrowing limit.
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