Americans’ mortgage debt increased to $10T in Q4

Overall household debt increased by $206 billion in the fourth quarter of 2020 to $14.56 trillion, according to the Federal Reserve Bank of New York. The Fed said that increase was primarily driven by a dramatic increase in mortgage originations.

Mortgage debt balances broached the $10 trillion mark in the fourth quarter, increasing by $182 billion from the third quarter to $10.04 trillion at the end of December, the Federal Reserve Bank of New York’s Center for Microeconomic Data said Wednesday.

New mortgage originations, driven by record-low interest rates that propelled refinancings, totaled $1.2 trillion in the fourth quarter, surpassing volumes seen during the historic refinance boom in the third quarter of 2003, the New York Fed said.

“2020 ended with a substantial increase in new extensions of credit, driven by record highs of new mortgages and auto loan originations,” said Wilbert Van Der Klaauw, senior vice president at the New York Fed. “Notably, the overall median mortgage origination credit scores jumped up, reflecting a high share of refinances.”

Delinquency rates also continued to decline in the fourth quarter, attributed to forbearance exits provided by the CARES Act. The share of mortgages that transitioned to early delinquency dropped to 0.4% in the fourth quarter, according to the New York Fed’s data. As of late December, the overall share of outstanding debt that was in some stage of delinquency was 1.6 percentage points lower than the rate observed prior to COVID-19 in the United States.