Americans rushed to buy homes and cars last year, making total household debt surge by $1 trillion, the biggest such increase since 2007.
The total household debt held by US families now amounts to $15.58 trillion.The figures were released in the latest Household Debt and Credit Report published by the Federal Reserve Bank of New York.
According to the report, the largest component of the increase was mortgage balances, which rose by $258 billion in the last three months of the year. Overall in 2021, Americans took out $4.5 trillion in mortgages, the most since 1999.
The second-largest contributor was car loans. The regulator attributes the $181-billion increase during the fourth quarter to people buying more expensive cars rather than buying more cars. The rise in car-loan borrowing may also be attributed to surging vehicle prices as automakers struggled with semiconductor shortages and global supply-chain issues.
Mortgages and car loans were followed by credit card debt, while student debt actually decreased by $8 billion, with lower student enrolment cited as one of the contributing factors.
Many Americans struggled to make ends meet last year as inflation soared, accelerating to as much as 7% in December, the sharpest increase in nearly forty years. Median income reportedly fell 3% while the rising cost of living means consumers have to pay more for everything from groceries to gasoline. Inflation in January continued to exceed the average monthly run rate and is expected to peak in February, according to Bloomberg.
The US has the second-largest household debt in the world, which in 2020 stood at over 216% of GDP. The worlds’ most indebted population lives in Hong Kong, where household debt was nearly 260% of GDP in 2020.
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