U.S. household debt reached another record high in the most recent quarter, according to the Federal Reserve Bank of New York.
During the third quarter of 2024, total household debt rose 0.8% from Q2, reaching an all-time high of $17.94 trillion.
Credit card balances rose $24 billion during the period, hitting $1.17 trillion. Open credit card accounts also reached a record 600 million during the quarter.
Donghoon Lee, Economic Research Advisor at the New York Fed, says that although debt levels have risen, wages have grown more.
“Although household balances continue to rise in nominal terms, growth in income has outpaced debt… Still, elevated delinquency rates reveal stress for many households, even amid some moderation in delinquency trends this quarter,” said Lee, per Fox Business.
Q3 2024 marked the tenth consecutive increase in homeowners borrowing equity in their homes. During the quarter, home equity lines of credit ballooned to $387 billion.
The growing debt levels are partly a consequence of the Federal Reserve’s aggressive tightening campaign that began in early 2022 and only recently started unwinding.
In September, the Fed enacted a significant 50 bps cut, reducing interest rates from 5.5% to 5.0%. A further 25 bps cut was implemented earlier this month, bringing rates down to a still lofty 4.75%.
Before the tightening campaign began less than three years back, interest rates in the U.S. stood at just 0.25%.
The consequences of elevated rates meant mortgage interest and other debt obligations rose.
As of November 14, the average 30-year fixed mortgage rate in the U.S. stood at 6.78%. At the beginning of 2022, the same term averaged just 3.22%.
Today’s average payment on a $500,000 mortgage would be just over $2,600 before property tax and homeowner’s insurance. That same mortgage would cost $1,734 in early 2022. That works out to $866 more in monthly debt payments or nearly 50% more than in 2022.