The nation’s consumer debt in the first quarter of 2023 hit a new high of $17 trillion despite a decrease in home borrowing.
The record-level number includes an increase of almost $150 billion, up .9% from January to March, according to the Federal Reserve.
“The mortgage refinancing boom is over, but its impact will be seen for decades to come,” said Andrew Haughwout, director of household and public policy research at the New York Fed, according to a report from CNBC.
“As a result of significant equity drawdowns, mortgage borrowers reduced their annual payments by tens of billions of dollars, providing additional funding for spending or paydowns in other debt categories,” he added.
That increase came even though new mortgage originations, including refinancing, totaled just $323.5 billion, the lowest level since the second quarter of 2014. The total was 35% lower than in the fourth quarter of 2022 and 62% below the same period a year ago.
READ MORE: Pentagon warns debt default risks troops’ pay
New home loans peaked at $1.22 trillion in the second quarter of 2021 and have been falling since as interest rates have increased. A series of Fed rate cuts helped push 30-year mortgage rates to a low of around 2.65% in January 2021.
But rates are now around 6.4%, as the central bank has enacted 10 rate increases totaling 5 percentage points to fight inflation, according to central bank data through Fannie Mae. The higher rates helped push total mortgage debt to $12.04 trillion, up 0.1 percentage points from the fourth quarter. Borrowers had used the previously lower rates to buy new homes and refinance, in a trend that appears to have ended.
The growing level of consumer debt has soared by $2.9 trillion since 2019. The recent concerns have also cast concerns over the rest of the year as financial experts increasingly warn of potential recession fears.
“The fact that they didn’t fall in Q1 this year doesn’t bode well for the rest of the year,” said Matt Schulz, chief credit analyst at LendingTree, told CNN Business.
In addition to increased overall consumer debt, student loan debt edged up to $1.6 trillion while auto loans reached $1.56 trillion, according to the report. Credit card debt has reportedly increased among Americans in paying for daily necessities, adding to long-term worries as month-to-month debt expands among American households already facing generation-high inflation.