“Unlike the 2003-2006 housing boom, mortgage debt has been rising much more slowly than home values,” New York Fed researchers led by Andrew Haughwout said in a separate blog post.
Haughwout also noted that loans nowadays are going to borrowers with higher credit scores, reflecting continuing high lending standards coming out of the 2008 financial crisis. More than two-thirds of newly originated mortgage debt last quarter was for borrowers with credit scores over 760, while just 2% went to subprime borrowers. That compares to an average of 12% in the years leading up to the Great Recession.
Autos were the third-highest category of debt after mortgages and student loans, thanks to an increase in prices that’s prompted buyers to borrow more. That may create a longer-term financial burden for households stuck with large loan payments, even as prices of used vehicles start coming down from their peaks.
As used-car prices drop, new borrowers in particular are at risk in that they may owe more on their cars than the vehicles are worth.
Student-loan debt in 2021 posted the smallest annual increase in nearly two decades, according to the New York Fed, as far fewer Americans enrolled in college during the pandemic, and interest payments were cut to 0% due to Covid-19 forbearance measures. The Biden administration last month extended the pause on payments to Aug. 31 from May 1.
Americans owe a collective $1.8 trillion in student-loan debt, according to a separate measure by the Fed.
This article was provided by Bloomberg News.