Americans are borrowing like never before, according to a new report from the Federal Reserve that revealed U.S. household debt swelled to a record $16.9 trillion in the final quarter of 2022, notching the largest quarterly increase in 20 years.
Total debt balances grew by $394 billion in the fourth quarter, driven mostly by a $254 billion increase in mortgage balances, according to the latest Quarterly Report on Household Debt and Credit from the Federal Reserve Bank of New York, released on Feb. 16.
Overall, household debt balances are now $2.75 trillion higher than at the end of 2019, the last year before the pandemic recession hit.
Much of the rise in household debt can be attributed to a tumultuous 2022, during which the Federal Reserve boosted its benchmark interest rate to more than 4 percent by the end of December from near zero last March, the fastest pace of monetary tightening since the early 1980s.
The sharp rise in interest rates came as the Fed fought to quash an inflation rate that had surged to a 40-year high. While inflation has eased in recent months, it’s still well above the Fed’s target of 2 percent.
Credit Card Debt Soars
Credit card balances saw a $61 billion increase in the fourth quarter, which is the biggest jump in the history of the data series, which goes back to 1999. Americans also added more than ever to their credit card debt in all of 2022, with balances growing by a record $130 billion.
“For a while, Americans took advantage of stimulus payments and the fact that they were spending less due to pandemic concerns to make major progress paying down their credit card debt,” Ted Rossman, senior industry analyst at Bankrate, told The Epoch Times in an emailed statement.
“But robust consumer spending, the hottest inflation readings in 40 years, and sharply higher credit card rates have combined to push credit card balances to a new record high.”
Credit card balances now stand at $986 billion, above the pre-pandemic high of $927 billion.
The sharp rise in credit card debt gives pause in light of the fact that delinquency rates for credit card borrowers are on the rise and have surpassed pre-pandemic levels.
