US household debt falls to $18.8 trillion in Q2

According to the latest Household Debt and Credit Report from the Federal Reserve Bank of New York, aggregate U.S. household debt declined by $13 billion in the second quarter to $18.8 trillion. This represents the first quarterly decline since the 2020 pandemic lockdowns. However, the decrease was primarily driven by a $74 billion to $75 billion drop in mortgage debt, which researchers noted may be due to a temporary gap in reporting caused by a transfer of servicing.

In contrast to the overall decline, consumer spending-related debt rose significantly. Auto loan balances increased by $28 billion, reaching record nominal levels, while credit card balances grew by $21 billion to $1.26 trillion. Home equity line of credit (HELOC) balances also rose by $13 billion, marking 17 consecutive quarters of growth as homeowners seek alternatives to high mortgage refinancing rates.

While the share of credit card debt more than 90 days past due rose from 7.6% to 12.8%, New York Fed researchers stated that the pace of new delinquencies has remained relatively stable for nearly two years. They attributed the rise in the stock delinquency rate to lenders keeping “stale, charged-off debts” on their books longer rather than a fundamental worsening of consumer credit quality. Despite this, analysts note a “K-shaped” economic reality where many households remain vulnerable to inflation and high interest rates.