Fed Says U.S. Household Debt Declined 0.7% During Second Quarter

U.S. household debt fell 0.7 percent during the second quarter as a drop in mortgage balances outpaced a rise in borrowing to finance cars and education, according to a Federal Reserve Bank of New York survey.

Consumer indebtedness declined $78 billion to $11.15 trillion, according to a quarterly report on household debt and credit released today by the Fed district bank. Mortgage balances decreased $91 billion to $7.84 trillion and home-equity lines of credit fell by $12 billion to $540 billion.

Rising stock prices and a rebounding housing market have bolstered household finances, boosting confidence and consumer spending. Retail sales rose 0.2 percent in July, the fourth consecutive monthly increase, Commerce Department figures showed yesterday in Washington. Americans have slashed their debt from a peak of $12.68 trillion in the third quarter of 2008, according to the New York Fed.

“Although overall debt declined in the second quarter, households did increase non-housing debt, led by rising auto loan balances,” Andrew Haughwout, vice president and research economist at the district bank, said in a statement. “Furthermore, households improved their overall delinquency rates for the seventh straight quarter, an encouraging sign going forward.”

Non-housing borrowing increased by 0.9 percent as car-loan balances rose by $20 billion, and student-loan and credit-card borrowing each increased by $8 billion, the report said. Auto-loan debt has grown by $108 billion in the last nine quarters, according to the New York Fed.

Delinquency rates continued to decline in the second quarter, with 7.6 percent of outstanding debt in “some stage of delinquency,” down from 8.1 percent in the first quarter, the New York Fed said. There were 380,000 new bankruptcies during the second quarter, 4.8 percent fewer than in the same period in 2012.

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.

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