Fed Says Household Debt Fell 0.9% During First Quarter

Household debt in the U.S. fell 0.9 percent during the first quarter as a decline in real-estate borrowing outpaced an increase in student loans, according to a Federal Reserve Bank of New York survey.

Consumer indebtedness shrank by $100 billion from the end of December to $11.44 trillion on March 31, according to a quarterly report on household debt and credit released today by the district bank. Mortgages balances fell by $81 billion and home-equity lines of credit declined $15 billion.

Student-loan borrowing, the biggest piece of consumer debt aside from home loans, climbed 3.4 percent to $904 billion, according to the New York Fed. Since household debt peaked in the third quarter of 2008, student-loan indebtedness has increased by $293 billion while other types of borrowing have dropped a combined $1.53 trillion, the report said.

“Student loan debt continues to grow even as consumers reduce mortgage debt and credit card balances,” Donghoon Lee, senior economist at the New York Fed, said in a statement. “It remains the only form of consumer debt to substantially increase since the peak of household debt in late 2008.”

Credit-card balances were $679 billion, or 21.6 percent lower than their peak of $866 billion in the fourth quarter of 2008, the New York Fed said. Auto loan originations rose 2.1 percent to $72 billion in the first quarter and are 43.6 percent above the bottom reached in the first quarter of 2009, the survey showed.

Delinquency rates continued to decline in the first quarter, with 9.3 percent of outstanding borrowings “in some stage of delinquency” compared with 9.8 percent at the end of 2011, according to the report. There were 371,000 new bankruptcies during the first three months of the year, 14.3 percent less than the comparable period in 2011.

The New York Fed said the report is based on data compiled by the bank’s Consumer Credit Panel, a nationally representative random sample from Equifax Inc. credit-report data.

To contact the reporter on this story: Caroline Salas Gage in New York at csalas1@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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