Source: Nworeport

Household debt has hit a record high in the U.S. as home and auto prices skyrocket, while more Americans return to splurging with credit cards as the economy begins to recover.

In a Tuesday report, the Federal Reserve announced that total household debt increased by $286 billion to $15.24 trillion in the third quarter of 2021, after leveling off for much of the pandemic.

Mortgage balances, the most significant component of household debt, increased by $230 billion and stood at $10.67 trillion at the end of September, reflecting fast-rising home prices.

Total non-housing balances grew by $61 billion, including a $28 billion jump in auto loan balances as supply chain issues spurred considerable increases in the prices of both new and used vehicles.

Although credit card balances increased by $17 billion, they remain $123 billion lower than they had been at the end of 2019.

Student loan balances grew by $14 billion, coinciding with the academic borrowing year.

During the pandemic, many households paid down debt and

managed to increase their savings, thanks to government stimulus checks and reductions in discretionary spending.

The trend has reversed as consumers rush to spend their stockpiled wealth, with private savings now back roughly in line with pre-pandemic trends

‘As pandemic relief efforts wind down, we are beginning to see the reversal of some of the credit card balance trends seen during the pandemic, namely reduced consumption and the paying down of balances,’ said Donghoon Lee, research officer at the New York Fed. ‘At the same time, as pandemic restrictions are lifted and consumption normalizes, credit card usage and balances are resuming their pre-pandemic trends, although from lower levels.’

Some good

news to offset the bad; delinquency rates across all debt products have remained low and continue to decline since the beginning of the pandemic. The Fed attributes this to lender concessions and legal relief for debtors.

The share of mortgages that transitioned to delinquency increased slightly to 0.41 percent from the second quarter’s record low, as mortgage forbearance protections ended.

As of late September, 2.7 percent of outstanding debt was in some stage of delinquency, a 2.0 percentage point decrease from the fourth quarter of 2019, just before the COVID-19 pandemic hit the United States.

Inflation has played a significant role in boosting household debt, as rising home and auto prices force consumers to take out bigger mortgages and loans for purchases.

Radian’s Home Price Index for September found that U.S. home prices rose at an annualized rate of 17.6 percent from the prior month, marking the sixth consecutive month of month-over-month rate increases.