WASHINGTON: US consumers paid down credit card debt rapidly in the first quarter helped by government stimulus that also is boosting spending, according to new data released Wednesday.
And while mortgage debt increased amid the blistering pace of home sales, the New York Federal Reserve Bank said a record number of new home loans came from consumers with very high credit ratings.
Total US household debt increased by $85 billion to just over $14.6 trillion in the first three months of the year compared to the prior quarter, the report said. That put the total debt load $344 billion higher than same period of 2020, according to the quarterly data.
But credit card balances dropped by $49 billion, the second largest quarterly decline in card balances in the history of the data which dates back to 1999, the report said. The largest drop came in the second quarter of 2020, when the economy was largely shutdown to prevent the spread of Covid-19.
Total credit card balances are $157 billion lower than they had been at the end of 2019, due in part to paydowns but also constrained consumption opportunities amid the pandemic, the report said.
The data also showed better loan quality and a drop in delinquent borrowers helped by voluntary forbearance programs or those offered by the government aid packages.
Mortgage balances — the largest component of household debt — rose by $117 billion in the first quarter of 2021 to $10.16 trillion at the end of March. But of the more than $1.1 trillion of new mortgages a record 73 percent went to borrowers with credit scores over 760. And with pandemic forbearance programs in place, foreclosures dropped to the lowest ever, the report said. Meanwhile, only 15 percent of the $153 billion in new auto loans went to borrowers with credit scores below 620, the lowest share seen in the history of the data.
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