Household debt nears $16 trillion despite rising rates and inflation

Representative Rashida Tlaib (D-MI) joins activists in a demonstration outside an entrance to the White House calling for the cancellation of student debt in Washington, U.S., April 27, 2022.

The Federal Reserve reported Tuesday that household borrowing hit a new record in the first year of the new century.

Consumer debt and credit increased in the first quarter. The rise in household credit was driven by a 10% increase in mortgage debt, which now stands at $11.18 trillion.

Credit card balances were up 9% over the same period a year ago, despite a fifteen billion dollar decline in balances during the three-month period. In the first quarter, auto loan originations declined after the New York Fed described a historically brisk 2021.

Student loan debt increased by 14 billion dollars in the first quarter.

Consumer price inflation has risen 8.5% over the past year, and interest rates have risen to multi-year highs. Thirty-year mortgage rates are now around 5%, which is less than a year ago, according to Freddie Mac.

The number of household debt has consistently climbed, with mortgages making up 70% of it.

The New York Fed reported that households have originated $8.4 trillion in new mortgage debt since the Covid epidemic began, a move that has coincided with a massive rise in prices. Over the past two years, the median home price has increased by 30%.

The New York Fed said that the refinance boom that followed falling mortgage rates is waning as rates rise.

The Fed is expected to approve a series of additional hikes through the end of the year in order to combat soaring inflation.