Mortgage debt in US exceeds 2008 financial crisis peak
US mortgage debt has hit a record in the second quarter of 2019, exceeding the peak it reached during the 2008 financial crisis. However, delinquencies are lower and debt defaults have become less frequent than in 2008.
Mortgage balances rose by $162 billion in the second quarter of 2019 to $9.406 trillion, surpassing the figure of $9.294 trillion recorded in the third quarter of 2008, according to a report published Tuesday by the Federal Reserve Bank of New York.Also on rt.com ‘Like a debtors’ prison’: American who fled to CHINA from $30k in student loans
Mortgage lending in the second quarter increased by $130 billion from the previous quarter and reached $474 billion, exceeding the indicators since 2017. That came as US citizens queued to take advantage of low rates, particularly through refinancing.
The New York Fed also states that mortgage balances came to represent the largest component of US household debt, and the boost in mortgage loans drove it to its highest level of $13.86 trillion. Its total now is therefore $1.2 trillion higher, in nominal terms, than the previous peak of $12.68 trillion in the third quarter of 2008.Also on rt.com Are Americans living the ‘American dream’ in rented trailer parks? RT’s Keiser Report finds out
However, according to the regulator, the 2019 mortgage debt is different from that of 2008, as debt defaults have become less frequent while credit conditions have been tightened. Lenders now appear increasingly selective as to who receives lending. The median credit score for borrowers who received a new mortgage in the second quarter of 2019 was 759, which corresponds with the “very good” ranking, while a mere 10% of borrowers had credit scores under 651, the report said. The regulator claims such pickiness by lenders is paying off when it comes to delinquency rates.
“While nominal mortgage balances are now slightly above the previous peak seen in the third quarter of 2008, mortgage delinquencies and the average credit profile of mortgage borrowers have continued to improve,” Wilbert van der Klaauw, senior vice president at the New York Fed, said in the report, clarifying that only 0.9% of mortgage balances are 90 or more days delinquent, down from 1.0% in the previous quarter.
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