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Households adding debt at fastest rate since 2007

As reported by the Federal Reserve Bank of New York, U.S. households added debt totaling more than $241 billion during the quarter ending December 2013. Led by a $152 billion increase in residential mortgage debt, this increase in aggregate household debt was the largest quarter-over-quarter increase since the third quarter of 2007.

One of the 12 Federal Reserve Banks in the U.S., the Federal Reserve Bank of New York is the largest as measured by assets and volume. Located in New York City, the Federal Reserve Bank of New York executes the Federal Open Market Committee’s decisions to buy and sell U.S. Treasuries and other instruments such as residential mortgage-backed securities in the financial markets.

Other categories of debt considered in this survey of household debt include home equity loans, auto loans, credit card debt and student loans. The second largest increase in quarter-over-quarter debt was in student loan debt. During the fourth quarter of 2013, student loan debt increased by a reported $53 billion. The total amount of student debt outstanding at the end of 2013 was more than $1 trillion.

In comparison, the next largest category of household debt after mortgage debt and student loans at the end of 2013 was auto loans. After increasing by $18 billion during the fourth quarter of 2013, auto loan debt was reported to total $863 billion at the end of 2013.

An important measure of the ability of borrowers to service the outstanding debt load is the percentage of borrowers delinquent on their loan payments. At the end of 2013, the highest percentage of borrowers more than 90 days delinquent on their loans was that of those with student loan debt. As reported by the Federal Reserve Bank of New York, 11.5 percent of the outstanding student loan debt was more than 90 days delinquent.

Credit card debt was reported to have the second highest 90 day or more delinquency rate at 9.5 percent. The lowest delinquency rates, at the end of 2013, were reported on auto loans and home equity loans at 3.4 percent and 3.2 percent, respectively.

These aggregate borrowing figures indicate U.S. households are returning to borrowing levels not seen since 2007. Although delinquency rates have trended down for most household debt categories over the past several years, student loan delinquencies are on the rise.

Kirby Brown is the CEO of Beneficial Financial Group based in Salt Lake City.