According to a report by the New York Federal Reserve, total consumer debt reached a new high in Q1 2023, surpassing $17 trillion, despite a sharp decline in home borrowing. The total borrowing across all categories increased by nearly $150 billion, or 0.9%, from January to March, taking the total indebtedness up by $2.9 trillion from the pre-Covid period in 2019. However, new mortgage originations, including refinancings, reached their lowest level since Q2 2014, totaling just $323.5 billion. The total was 35% lower than in Q4 2022 and 62% below the same period a year ago.
While new home loans peaked at $1.22 trillion in Q2 2021, they have been declining as interest rates have increased. The Federal Reserve has enacted 10 rate increases totaling 5 percentage points to fight inflation, which has led to an increase in rates to around 6.4%. The higher rates helped push total mortgage debt to $12.04 trillion, up 0.1 percentage point from Q4.
Data from the Federal Reserve shows that about 14 million mortgages were refinanced during the pandemic period starting in March 2020. Some 64% were considered "rate refinances," or homeowners looking to take advantage of lower borrowing costs. Average savings totaled about $220 per month for those borrowers.
Despite rising rates, mortgage foreclosures remained low. Delinquency rates for all debt increased, up 0.6 percentage point for credit cards to 6.5%, 0.2 percentage point for auto loans to 6.9%, and 0.2 percentage point to 3% for total delinquency rates, the highest since Q3 2020. Student loan debt edged higher to $1.6 trillion, and auto loans nudged up to $1.56 trillion.
In summary, the report shows that total consumer debt has hit a new high, surpassing $17 trillion, despite a decline in home borrowing. The decline is attributed to the increase in interest rates, which has led to the end of the mortgage refinancing boom. Delinquency rates have increased, with credit card delinquency rates being the highest. Despite the increase in rates, mortgage foreclosures remained low.