By the end of 2020, total consumer debt saw an increase to almost $14.6 trillion. It has been pushed by an increase in housing market mortgage loans that can be considered record breaking, according to a Federal Reserve report that was published on Wednesday.
For Q4 of 2020, debt rose by 1.4%, which represents another $206 billion. This came as households used low interest rates and the monetary stimulus to their advantage.
For the first time, mortgage debt went over $10 trillion, rising at the fastest rate in Q4 since 2006. There has also been a quarterly increase of $182 billion. It peaked in a year when homeowners decided to use low rates to refinance to their advantage. This comes as people living in the city decided to move to the suburbs while a shift in housing continues due to the pandemic.
Last year, total household debt increased by $414 billion. Meanwhile, a shift from getting loans for automobiles and education into financing mortgages took place. In 2020, mortgage debt rose to $486 billion. Conversely, student loans only rose by $47 billion while automobile debt only rose by $43 billion. Additionally, credit card debt fell in 2020 by $108 billion.
Low interest rates and the holding back of mortgage guidelines that keep delinquencies in check served as the two main tailwinds of people borrowing money in 2020.
If a person doesn’t pay debt 90 days more past the deadline, it is considered “serious delinquency.” For mortgage debt in Q4 2020, this was at 0.65%, which is less compared to the 1.1% rate in Q4 2019. Meanwhile, the rate of delinquency in terms of student loan debt went from 9.21% in 2019 to 2.76% in 2020.
Overall, the serious delinquency rate for all forms of debt decreased to 1.25% last year from 2.36% in 2019.