Household debt jumps by the most in 14 years to nearly $15 trillion in the second quarter

KB Home is currently building single-family residential homes in Valley Center, California.This was the fastest rate of growth since the fourth quarter 2013.The total debt balances rose by $313 billion between April and June, the largest increase since 2007.The Federal Reserve reported Tuesday that the household debt increased by its highest amount in 14 years in the second quarter thanks to a boom in the housing market, which brought the total American IOU to just under $15 trillion.The majority of the gains came from mortgage originations (both initial purchases as well as refinances), which are on fire since the Federal Reserve kept benchmark borrowing rates at historic lows.The mortgage balances rose by $282 billion in the second quarter, an increase of 2.8% from the first quarter, and 6.7% from last year, making the total $10.4 trillion.In the last four quarters, nearly $4.6 trillion has been borrowed for mortgage originations, which is 44% of total home loan amounts.The debt numbers grew beyond mortgages. Non-housing balances rose to $44 billion.Auto loans increased $33 billion and credit card balances rose by $17 billion. The amount of student loan debt fell by $14 billion to $1.57 Trillion during this period. This is because forbearance programs kept education-related balances under control.In fact, the government's efforts to get consumers through the Covid-19 epidemic resulted in low levels of delinquency across the board. The aggregate figure of 2.7% of all debt was in some type of delinquency. This is a 2 percentage point decrease from the fourth quarter 2019, which was just before the pandemic.However, these breaks will expire in the next months and borrowers will now have to pay their loans on time.Joelle Scally, the administrator of the Center for Microeconomic Data, New York Fed said that "we have seen a very strong pace of originations in the last four quarters with extensions of credit for auto loans and mortgages combined with rebounding interest for credit card borrowing." "But, there are still 2 million mortgage borrowers who are at risk of financial distress if the forbearance programs end.However, credit quality has been good for borrowers in all areas, except housing.Newly originated mortgages had a median credit score of 760. 71% of all borrowers had a score above 760. A record 0.4% of mortgages went into default, and a record 0.5% of mortgages 90 days or more behind due set new records in the ongoing forbearance programs.