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US households owe a record amount, topping pre-recession peak

WASHINGTON – the U.S. household debt reached a record high in the first three months of this year, larger than the previous peak in 2008.

The americans have stepped up borrowing over the past three years, but about the nature of what the Americans owe has changed since the Great Recession. Student and car loans a larger part of the debt of households, while mortgages and credit card debt under the pre-recession levels.

The Federal Reserve Bank of New York said on Wednesday that household debt, which includes auto loans and home equity lines of credit, amounted to $12.73 trillion dollars in the first quarter. That is above the $12.68 billion outstanding in the autumn of 2008, the previous record. The figure is not adjusted for inflation or the size of the population.

“This record debt is not a reason to celebrate, nor a cause for alarm,” Donghoon Lee, research officer at the New York Fed said. “The debt and the borrowers look very different today.”

Measured as a percentage of the total U.S. economy, the debt of households is still smaller than in 2008. It is equal to 67 percent of the economy now, compared with 85 percent nine years ago.

And with interest rates low, but the Americans are better able to cope with the loans they have taken. The percentage of all household debt that is seriously delinquent — meaning that the payments of 90 days or more past due was 3.4 percent. That’s down from the post-recession peak of 8.7 percent in the beginning of 2010.

Just 203,000 Americans declared bankruptcy in the first three months of this year, the lowest in the 18 years that the New York Fed has tracked the data.

Still, there were a number of points of concern. Car loans have gone up dramatically from 44 percent to $1.17 billion since the last peak in household debt, nine years ago. And a greater percentage of these loans has fallen from 90 days or more overdue: 3.8% now, against 3.3 percent two years ago. Still, that’s down from a recent peak of 5.3 percent in the fall of 2010.

Students loans are also a potential trouble spot: They reached $1.3 billion in the first quarter increased by 120 percent since 2008. Almost 11 percent of that debt is 90 days overdue or more. The Fed estimates that the actual figure may be double that amount, because many borrowers are able to defer loan payments while they continue with their studies, or if they are unemployed.

But the general picture is also a lot of bright spots. More credit is being held by the older and the more creditworthy Americans, who should defaults less likely. Older households generally have a higher income and wealth than younger ones.

Americans aged 60 and older now hold 22.5 percent of all loans, an increase of 16 percent in 2008, the New York Fed said in a separate presentation in April.

The shift is particularly dramatic in the case of mortgages, which are much harder to obtain for Americans with lower credit scores.

Almost 61 percent of the new mortgages in the first quarter went to borrowers with credit scores of 760 or higher, according to the New York Fed report. That is only 36 percent in 2008. Only about a third of Americans have a score that high.

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