It is no secret that consumers borrowed a lot of money over the years. However, the situation continues to deteriorate, as they ended 2021 with record levels of debt. As a result, the total U.S. consumer debt at the end of the year reached $15.6 trillion, a year-over-year jump of $333 billion during the fourth quarter and just over $1 trillion for the full year.
The quarterly was the biggest in many years more precisely since 2007. Also, the annual gain was the largest ever in records going back to 2003.
The news about consumer debt comes ahead of a period in which the central bank is expected to start jacking up interest rates to reduce inflation. Unfortunately, it is running at its fastest pace in nearly 40 years. Markets expect the Federal Reserve to start increasing interest rates in March, the first of at least five bump-ups this year.
Consumer debt and the real estate market
A significant part of the debt-load increase came from mortgages, which saw balances rise by $890 billion for the year. Mortgage originations for the year totaled over $.5 trillion, a new record.
In the fourth quarter of the year, credit card balances rose by $52 billion, a new quarterly record.
Owing to the rapid gain in prices, auto-loan balances increased by $90 billion, or 6.6% to $1.46 trillion. New auto prices jumped by 11.8% for the year while prices for used vehicles rose by 37.3% accordion to Labor Department’s data.
Surprisingly, one area that saw little increase was student loans, which edged higher by just $20 billion for the year. Student loans even declined marginally in the fourth quarter. Forbearance programs, most expired. However, they are still keeping balances and delinquencies in check.
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