BauerFinancial: U.S. consumer debt exceeds 2008 peak

CONSUMER DEBT HAS increased to more than $13.5 trillion nationwide – a more than 21 percent increase since 2013, according to BauerFinancial Inc., a banking research and analysis firm in Coral Gables, Fla. / BLOOMBERG NEWS FILE PHOTO/ARIANA LINDQUIST

PROVIDENCE – Consumer debt has grown to more than $13.5 trillion nationwide, exceeding the 2008 peak by $869 billion and more than 21 percent higher than the 2013 trough, according to BauerFinancial Inc., a banking research and analysis firm in Coral Gables, Fla.

The firm said housing is not the culprit this time around; instead it’s rising debt from student loans, credit cards and autos.

Based on a recent report from the Federal Reserve Bank of New York, mortgage balances were essentially unchanged from Sept. 30, 2018, to year-end and home equity lines of credit have been on a downward trend since 2009. At $412 billion, according to the report, home equity lines of credit are now at their lowest level in 14 years.

However, after increasing $26 billion in the fourth quarter, credit card balances have again reached their 2008 peak of $870 billion. In addition, student loan balances increased by $15 billion and auto loans increased by $9 billion in the fourth quarter.

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The report stated that account closings are at their highest level since 2010 and inquiries are at their lowest level since the data has been collected, indicating waning demand. Meanwhile, delinquency rates remain relatively steady at 4.7 percent. Of that, about two-thirds is seriously delinquent, or at least 90 days past due.

BauerFinancial pointed to several red flags:

  • Nearly 11.5 percent of aggregate student loan debt is 90 days or more delinquent or in default.
  • Credit card balances flowing into the 90-plus-days-delinquent category have been climbing since 2017.
  • Auto loans that are delinquent 90 days or more have been trending up for the past seven years.

The New York Fed report broke down debt by age categories. For student loan debt, the group most likely to be seriously delinquent is from ages 40 to 49. For credit cards and auto loans, the group most likely to be seriously delinquent is from ages 18 to 29.

One thing the firm found particularly disconcerting is senior citizen debt, which has been rising over the past 15 years. A large part of that comes from home equity lines of credit, as seniors tap into home equity for home repairs and medical expenses, BauerFinancial said.

During the Great Recession about a decade ago, the firm noted, delinquencies hit their peak nearly two years after household debt peaked.

“That’s something we will continue to monitor,” the firm said.

Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.

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