Total consumer debt hit a new high in the first quarter of 2023, surpassing $17 trillion amid a sharp decline in mortgages.
Total borrowing across all categories reached $17.5 trillion, up nearly $150 billion, or 0.9 percent, in the first quarter, the New York Fed said on Monday. As a result, total debt increased by about $2.9 trillion compared to 2019 before the COVID-19 pandemic.
The increase came despite new mortgage originations, including refinancing, of just $323.5 billion, the lowest since Q2 2014. Total revenue was down 35% from Q4 2022 and down 62% from the same period last year. .
New mortgages peaked at $1.22 trillion in the second quarter of 2021, but have since declined as interest rates have risen. A series of Fed rate cuts pushed 30-year mortgage rates to a low of about 2.65% in January 2021.
But central bank data via Fannie Mae show that the central bank has hiked rates by 5 percentage points a total of 10 times to combat inflation, with rates now sitting at around 6.4%. Rising interest rates pushed total mortgage debt to $12.04 trillion, up 0.1 percentage points from the fourth quarter.
Borrowers used the previously low interest rates to both buy new homes and refinance, the latter of which looks like the boom is over.
“The mortgage refinancing boom is over, but its effects will continue for decades to come,” Andrew Horwart, director of the New York Fed’s Household and Public Policy Research Department, said in a statement accompanying the report.
About 14 million mortgages have been refinanced during the pandemic, which began in March 2020, according to Fed data. Of those, about 64% were considered “interest rate refinancing,” homeowners who wanted to take advantage of lower borrowing costs. The average savings for these borrowers is about $220 a month, according to the New York Fed.
“As a result of the significant capital drawdown, mortgage borrowers have cut their annual payments by tens of billions of dollars, providing additional funding for spending and repayments in other debt categories,” Horwart said. .
Mortgage foreclosures remained low despite rising interest rates. Delinquency rates for all debts rose, with credit cards rising 0.6 percentage points to 6.5% and car loans rising 0.2 percentage points to 6.9%. The total delinquency rate rose 0.2 points to 3%, the highest since Q3 2020.
Student loan debt increased slightly to $1.6 trillion, and auto loans similarly increased to $1.56 trillion.
