WASHINGTON — U.S. households continued to slash their level of debt in the second quarter, with the bulk of the retrenchment due to homeowners paying down their mortgages and cutting back on their use of home equity lines of credit, the New York Federal Reserve Bank reported Wednesday.
According to its Household Debt and Credit Report, household indebtedness declined to $11.38 trillion, a $53 billion decline from the first quarter of 2012. The New York Fed said outstanding household debt has decreased $1.3 trillion since its peak in Q3 2008.
"This reduction in consumer debt was driven by the continued decrease in loans secured by real estate," the report said. It noted that mortgage balances shown on consumer credit reports continued to fall, and now stand at $8.15 trillion, a 0.5% decrease from the level in the first quarter. Home equity lines of credit (HELOC) balances dropped by $23 billion (3.7%).
According to the report, household debt balances excluding mortgages and HELOCS increased by 0.4% in the second quarter to $2.6 trillion, boosted by increases of $14 billion in auto loans and $10 billion in student loans.
In a blog post accompanying the release of the report, New York Fed economists Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw said the report "indicates a continuation of the downward trend in household debt, which followed a long period of substantial increases."
"When we combine nonmortgage and mortgage debt, we find that the active reduction of debt continued in 2010 and 2011. We conclude that while nonmortgage debt rebounded somewhat in 2011, household deleveraging continued, primarily as homeowners continued to pay down their housing debt," they wrote.
On the delinquency front, the New York Fed report said there was an overall improvement in the second quarter. It said 9.0% of outstanding debt was in some stage of delinquency as of June 30, compared with 9.3% at the end of Q1. About $1.02 trillion of debt is delinquent, with $765 billion seriously delinquent -- at least 90 days late or "severely derogatory".
By category, the report said delinquency rates for mortgages (6.3%), credit cards (10.9%), and auto loans (4.2%) decreased from the previous quarter, while rates for student loans (8.9%) and home equity lines of credit (4.9%) increased.
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