U.S. household debt jumped in the fourth quarter of 2016, the Federal Reserve Bank of New York reported Thursday, bringing total indebtedness just short of the peak previously reached in 2008 right before the financial crisis hit.
Households added $226 billion in debt, or nearly 2 percent, in the quarter to bring total debt to $12.58 trillion. That is just 0.8 percent below the $12.68 trillion peak in the third quarter of 2008, just before the financial disaster struck.
Unlike then, when the run-up in debt turned out to represent a looming crisis, credit growth in the past few years has been driven not by mortgages, but by student loans and auto loans.
“Debt held by Americans is approaching its previous peak, yet its composition today is vastly different as the growth in balances has been driven by non-housing debt,” said Wilbert van der Klaauw, a senior vice president at the New York Fed.
Student debt increased by $78 billion to $1.3 trillion, and remains the second largest category of household debt behind home loans, outstripping credit card and auto debt. Delinquencies were up to 11.2 percent in the quarter, from 10.9 percent before.
Home lending continues to recover. Mortgage originations reached the highest levels since the recession, hinting at resiliency in the housing recovery and providing some optimism for lenders concerned that lending standards were tightened too much during the aftermath of the crisis and imposition of new, more stringent regulations.
In a blog post, New York Fed researchers suggested that, at the current pace, mortgage lending might finally regain its pre-crisis peak this year.
Meanwhile, bankruptcies were at the lowest level in the 18 years the regional Fed bank has been keeping track, a sign both of recovery and of tighter lending standards.
The New York Fed’s data is taken from anonymized credit data from the reporting agency Equifax.
