US Household Debt Increased $333B in Q4 of 2021

Total U.S. household debt increased 2.2%, or $333 billion, to $15.58 trillion in the fourth quarter of 2021, according to a Tuesday (Feb. 8) press release from the Federal Reserve Bank of New York’s Center for Microeconomic Data.

According to the Household Debt and Credit Report, the total debt balance increased by $1 trillion during 2021. The amount is also $1.4 trillion higher than it was at the end of 2019, and the report says the amount is the largest increase seen since 2007.

“The total increase in nominal debt during 2021 was the largest we have seen since 2007,” said Wilbert Van Der Klaauw, senior vice president at the New York Fed. “The aggregate balances of newly opened mortgage and auto loans sharply increased in 2021, corresponding to increases in home and car prices.”

Mortgage balances were up $258 billion in the fourth quarter, standing at $10.93 trillion at the end of December, while credit card balances were up $52 billion — the largest quarterly increase in the 22-year history of the data.

That said, credit card balances were still $71 billion lower than at the end of 2019.

While credit scores for new mortgages have declined in the last few quarters as opposed to the beginning of the pandemic, they’re still high, showing the high quality of the freshly opened mortgages and a higher share of refinances.

Additionally, newly originated auto loans hit $181 billion during the fourth quarter.

PYMNTS recently reported that credit card spending was on the rise, particularly on goods and services for travel and entertainment. However, as debit spending and buy now, pay later (BNPL) gain traction, that may change.

See also: Waning Consumer Sentiment May Give Tailwinds for Debit, BNPL Spending

This comes as peoples’ perception of the economy was at a multi-year low as of December 2021, with the Consumer Sentiment Index falling to 67.2 in the January survey, down from 70.6 in December. Last year, January’s number was at 79.

Per the PYMNTS report, the worsening outlook might end up changing how consumers look at purchases and how they shop.