(Washington) American households continued to borrow in the third quarter, at a much higher level than last year in order to finance their purchases, despite inflation at its highest for 40 years, but defaults are also on the rise.
Total US household debt stood at $1.651 billion in the third quarter, up $351 billion or 2.2% from the same period last year, according to a report released Tuesday by the New York Fed.
This is 2.36 billion more than at the end of 2019, before the COVID-19 pandemic, specifies this regional branch of the American central bank, in a press release.
“Credit card, home loan and car loan balances continued to rise in the third quarter of 2022, reflecting the combination of robust consumer demand and higher prices,” said Donghoon Lee, an economist at the New York Fed.
He clarified, however, that “new home lending has slowed to pre-pandemic levels amid rising interest rates.”
Credit card balances, widely used in the United States for everyday purchases, saw their biggest year-over-year increase in 20 years, climbing 15%.
The only exception: student loans, after the announcement at the end of August by President Joe Biden of the cancellation of part of the burden for borrowers.
But faced with this accumulation of debt, it is becoming difficult for some households to repay their maturities, and “the share of unpaid debt has increased for almost all types” of credit, reports the New York Fed.
Inflation in the United States has reached its highest level since 1981 this year. After peaking at 9.1% year on year in June, price increases have slowed, but remained very strong in July, August and September, respectively at 8.5%, 8.3% and 8.2%, according to the CPI index, which refers.
Faced with this, the Fed has been raising its key rate since March, so that the banks also increase the interest rates on the loans they grant to households and businesses. The goal is, ultimately, to slow down consumption in order to relieve the pressure.
Mortgage rates, which have remained at historic lows for more than a year, have thus been rising since the beginning of 2022, now above 7% for a 30-year loan.