WASHINGTON: Household debt has surpassed a peak set during the 2008 financial crisis, marking a long, gradual recovering in borrowing by American consumers, the New York Federal Reserve Bank reported on Wednesday (May 17).
The milestone marked nearly three consecutive years of growing demand for credit, with consumers and households who suffered during the Great Recession recovering to the point where they again qualify for loans.
Total household debt reached US$12.73 trillion in the first quarter of this year, just topping the US$12.68 trillion peak of the third quarter of 2008, in the midst of the credit bubble which sparked the global financial crisis.
The new level marked a 1.2 per cent quarterly increase, or US$149 billion, the 11th consecutive gain.
"Almost nine years later, household debt has finally exceeded its 2008 peak but the debt and its borrowers look quite different today," Donghoon Lee, a research officer at the New York Fed, said in a statement.
The new record debt level should be neither grounds for celebration nor cause for alarm, said Lee.
Delinquencies have improved significantly since the recession and remain low but there were pockets of concern.
"Auto loan and credit card delinquency flows are now trending upwards, and those for student loans remain stubbornly high," Lee said.
Mortgage balances have also grown and delinquencies and foreclosures have edged higher, but remain low in historical terms, the report found.
While debt can spur consumer spending and economic growth, the New York Fed reported last month that the persistently high level of student debt may be a drag on spending and a barrier to home ownership and economic mobility.
Seriously delinquent mortgages, home equity and auto loans were flat while delinquent student loans remained alarmingly high at 11 per cent, down only two tenths from the prior quarter, according to the report.
Credit card debt delinquencies also rose 0.4 percentage points to 7.5 per cent.