A clerk in Miami uses a credit card reader to charge a customer.
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Total consumer debt reached a new high in the first quarter of 2023, surpassing $17 trillion even as household lending fell sharply.
The New York Federal Reserve reported Monday that borrowing across all categories totaled $17.05 trillion, an increase of about $150 billion, or 0.9%, during the January to March period. The total indebtedness from the pre-Covid period ending in 2019 totaled about $2.9 trillion.
The increase came as new mortgage originations, including refinances, totaled $323.5 billion, the lowest level since the second quarter of 2014. The total was down 35% compared to the fourth quarter of 2022 and down 62% from the same period a year ago. ,
New home loans peaked at $1.22 trillion in the second quarter of 2021 and have been declining since interest rates increased. A series of Fed rate cuts helped propel 30-year mortgage rates down to about 2.65% in January 2021.
But rates are now around 6.4%, because The central bank has enacted 10 rate hikes That totaled 5 percentage points to fight inflation, according to data from the central bank via Fannie Mae. Higher rates helped push total mortgage lending to $12.04 trillion, up 0.1 percent from the fourth quarter.
Borrowers used the earlier low rates to both buy new homes and refinance, the latter saw a boom that ended.
“The mortgage refinancing boom is over, but its effects will be seen for decades to come,” Andrew Howout, director of household and public policy research at the New York Fed, said in a statement accompanying the report.
Fed data shows that nearly 14 million mortgages were refinanced during the pandemic period beginning in March 2020. Some 64% were considered “rate refinancers,” or homeowners taking advantage of lower borrowing costs. According to the New York Fed, the average savings for those borrowers was about $220 per month.
“As a result of the significant equity drawdown, mortgage borrowers reduced their annual payments by tens of billions of dollars, providing additional funds for spending or payments on other debt categories,” Hougout said.
Despite rising rates, mortgage foreclosures remained low. Delinquency rates increased for all loans, rising 0.6 percentage points to 6.5% for credit cards and 0.2 percentage points to 6.9% for auto loans. The overall crime rate rose 0.2 percentage points to 3%, the highest since the third quarter of 2020.
Student loan debt increased to $1.6 trillion and auto debt increased to $1.56 trillion.
