US household debt tops 2008 peak: NY Fed

— U.S. household debt reached a record high in the first three months of this year, topping the previous peak reached in 2008, when the financial crisis plunged the economy into a deep recession.

Americans have stepped up borrowing over the past three years, yet the nature of what Americans owe has changed since the Great Recession. Student and auto loans make up a larger proportion of household debt, while mortgages — the epicenter of the financial crisis — and credit card debt remain below pre-recession levels. Those changes suggest households are still cautious about taking on debt to fuel day-to-day consumption.

The Federal Reserve Bank of New York said Wednesday that household debt, which also includes home equity lines of credit, stood at $12.73 trillion in the first quarter. That’s above the $12.68 trillion outstanding in the fall of 2008, the previous record. The figure isn’t adjusted for inflation or population size.

Even with debt levels back to record heights, analysts note that household borrowing appears more sustainable now than it did nearly a decade ago. Interest rates are lower, and lenders are much more focused on credit-worthy borrowers.

“This record debt level is neither a reason to celebrate nor a cause for alarm,” Donghoon Lee, research officer at the New York Fed said. “The debt and its borrowers look quite different today.”

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

Americans also appear to be better able to handle the loans they’ve taken out. The percentage of all household debt that is seriously delinquent — meaning payments are 90 days or more overdue — is 3.4 percent. That’s down from the post-recession peak of 8.7 percent in early 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 some areas of concern. Auto loans have ballooned 44 percent to $1.17 trillion since the last peak in household debt nine years ago. And a greater percentage of those loans have fallen 90 days or more overdue: 3.8 percent now, up from 3.3 percent two years ago.