Consumers in the U.S. continue to struggle with payments, as interest rates and inflation plunge households further into debt. According to new data from the Federal Reserve Bank of New York, U.S. household debt has reached $17 trillion in the first quarter of 2023.
The research is based on the New York Fed Consumer Credit Panel, which draws data from anonymized Equifax credit reports, this report provides valuable insights into the state of the economy and its impact on American households.
Record Levels of Debt
According to the Federal Reserve, aggregate household debt balances have increased by $148 billion in Q1 2023, a 0.9% rise from the previous quarter. This brings total balances to $17.05 trillion, representing a $2.9 trillion increase since the end of 2019, just before the pandemic-induced recession. While growth in mortgage balances has been relatively modest, other forms of debt, including home equity lines of credit (HELOC) and auto loans, have shown consistent upward trajectories.
The data also highlights a reduction in mortgage originations during Q1 2023, reaching the lowest point since Q2 2014. However, auto loan originations remained elevated compared to pre-pandemic volumes. These insights indicate potential shifts in consumer preferences and financial priorities, which could influence the development of new payment solutions and lending models.
The Federal Reserve Bank of New York also provides valuable data on delinquency rates and public records. While delinquency rates remained low and roughly flat in Q1 2023, the transition rates into early delinquency for credit cards and auto loans increased.
Inflation—A Global Problem
We’ve previously covered how credit card balances are increasing as inflation grows, and how more Americans are struggling with increasing costs and decreasing savings.
Cost-of-living is becoming a growing issue, and not just in the U.S. In the UK, for example, keeping up with the rising cost of goods is leaving some people to shoplift—or in many cases—turn to buy now, pay later (BNPL) services to divide up their payments in smaller installments to help during this difficult time.