U.S. Borrowers Getting Better at Managing Debt

Ever since the financial crisis of 2008-2009, U.S. households have borrowed less and paid debt more quickly than in the years before the crisis. Between 2000 and 2007, Americans were adding an average of $212 billion to outstanding debt balances. In 2009, total debt increased just $14 billion and by 2011 the increase had risen to $138 billion, still well below the average before the crisis.

The New York Federal Reserve Bank released its 2012Q2 Quarterly Report on Household Debt and Credit today, and this is just one of many nuggets available in the data. Here’s another: at the end of June 2012, total U.S. outstanding household debt had fallen by $1.3 trillion since reaching a peak in the third quarter of 2008. U.S. households have lowered total indebtedness by $53 billion in the second quarter of 2012 alone. Total indebtedness now stands at $11.38 trillion.

Not chump change, that’s for sure, but still down 10% in just four years. And the debt is being paid off, not written off. Mortgage delinquency rates are down 6.3% from the first quarter, while credit card delinquencies are down 10.9%, and auto loan delinquencies are down 4.2%. Only student loan delinquencies (up 8.9%) and home equity lines of credit (up 4.9%) were higher in the second quarter.

A few more nuggets from the report:

• Student loan debt rose $10 billion to $914 billion.
• Credit card balances ($672 billion) are at the lowest level since Q2 2002 and are down nearly a quarter (22.4 percent) from the peak in Q4 2008.
• Credit card delinquencies (10.9 percent) are at the lowest level since Q4 2008.
• Credit inquiries within six months—an indicator of credit demand—decreased for the second consecutive quarter, a 2 percent dip from Q1 2012.
• Auto loans stand at $750 billion, a quarterly increase of $13 billion.

The NY Fed’s press release and links to the full report are available here.

Paul Ausick