US households ramp up borrowing amid COVID-19 recovery: NY Fed

Yahoo Finance’s Brian Cheung joins the Yahoo Finance Live panel to discuss the latest as Americans are starting to take loans out again: NY Fed.

Video transcript

- Of course, in the pandemic, we had talked about e-commerce a lot, but now, according to the New York Fed, perhaps a turn back to debt coming on. We saw Americans pay down a large load of debt in the pandemic as uncertainty around employment issues and everything else hit hard into pandemic, but that could be changing now. And for more on that, I want bring on Yahoo Finance's Fed reporter Brian Cheung, who has an update on that front. Brian?

BRIANG CHEUNG: [INAUDIBLE] well, as you mentioned, new data from the New York Fed, alongside Equifax this morning, showing that total household debt increased by $313 billion to a total of $14.96 trillion. And that's the largest increase since 2007, the largest percentage increase since 2013. And one interesting point in this report was the increase in credit card balances. I believe we have a chart that shows the tick up that we've seen in the second quarter.

Again, you can see that at the very right-hand side of the chart. Not a very big uptick, but noticeable, given the declines that we saw through the-- most of 2020, as Zack mentioned, because of those paydowns, as people got those stimulus checks and tried to write off some of that debt. Now, when you also look at the bounceback in goods and, as of late, services consumption, not necessarily a surprise that people might be turning to credit cards. But again, still a ways to go on getting back to pre-pandemic levels.

And another interesting bit was on the mortgage front. This actually makes up the majority of household debt. And you can see the number of mortgage originations that we've seen in the second quarter hitting $1.2 trillion. If you take a look at most of those borrowers, actually 71% of them were highly rated. So about 760 or more was the credit score, at least on Equifax's scale, for most of those mortgages. So a very different picture than the subprime lending that we saw in the leadup to the 2008 financial crisis. So it does show that not only are Americans ready to spend more, but they're also ready to borrow more, guys.