Mortgage Balances Lead Overall Household Debt

Mortgages, the largest component of household debt, increased in the first quarter due to the year-over-year uptick in originations.

The Federal Reserve Bank of New York found in its quarterly Household Debt and Credit report that aggregate household debt balances rose in the first quarter of 2016. Total household indebtedness was $12.25 trillion as of March 31, 2016, a $136 billion, or a 1.1 percent increase from the fourth quarter of 2015. The data showed that overall household debt remains 3.3 percent below its 2008 third quarter peak of $12.68 trillion.

Mortgage balances shown on consumer credit reports came in at $8.37 trillion, a $120 billion increase from the fourth quarter of 2015. Balances on home equity lines of credit (HELOC) fell by $2 billion, to $485 billion.

The report showed that mortgage originations were at $389 billion in the first quarter of 2016. HELOC limits increased by 0.1 percent the first uptick in HELOC limits seen since the fourth quarter 2014.

A National Association of Home Builders (NAHB) analysis of the data showed that mortgage orginations were down by 42.5 percent in the first quarter of 2014, the dollar value of mortgage originations has since risen on a four-quarter basis for two consecutive years. The total amount of mortgage originations in the first quarter of 2015, $368 billion, was 11.0 percent above its level in the first quarter of 2014, $332 billion, and the total amount of mortgage originations in the first quarter of 2016, $389 billion, was 5.5 percent greater than its level in the first quarter of 2015. After dropping to a low of $1.31 trillion for all of 2014, mortgage originations rose by 34.5 percent  to 1.76 trillion in 2015.

The distribution of the credit scores of new mortgage borrowers increased, with the median credit score for newly originated mortgages increasing slightly, and 58 percent of all new mortgage dollars going to borrowers with credit scores over 760, the New York Fed reported. .

"Delinquency rates and the overall quality of outstanding debt continue to improve," said Wilbert van der Klaauw, SVP at the New York Fed. "The proportion of overall debt that becomes newly delinquent has been on a steady downward trend and is at its lowest level since our series began in 1999. This improvement is in large part driven by mortgages."