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182 posts on "Household Finance"
November 15, 2022

Balances Are on the Rise—So Who Is Taking on More Credit Card Debt?

Decorative: photo of stack of credit cards on credit card statements

Total household debt balances continued their upward climb in the third quarter of 2022 with an increase of $351 billion, the largest nominal quarterly increase since 2007. This rise was driven by a $282 billion increase in mortgage balances, according to the latest Quarterly Report on Household Debt & Credit from the New York Fed’s Center for Microeconomic Data. Mortgages, historically the largest form of household debt, now comprise 71 percent of outstanding household debt balances, up from 69 percent in the fourth quarter of 2019. An increase in credit card balances was also a boost to the total debt balances, with credit card balances up $38 billion from the previous quarter. On a year-over-year basis, this marked a 15 percent increase, the largest in more than twenty years. Here, we take a closer look at the variation in credit card trends for different demographics of borrowers using our Consumer Credit Panel (CCP), which is based on credit reports from Equifax.

Posted at 11:00 am in Credit, Household Finance | Permalink | Comments (0)
October 21, 2022

Federal Reserve System Conference on the Financial Stability Considerations for Monetary Policy

How does monetary policy affect financial vulnerabilities and, in turn, how does the state of the financial system interact with the maximum employment and price stability goals of monetary policy? These were the key questions covered in the September 30 conference organized by the Federal Reserve System. The conference was co-led by Federal Reserve Board Vice Chair Lael Brainard and Federal Reserve Bank of New York President and CEO John C. Williams, each of whom offered prepared remarks. The program also included a panel of current and former central bank policymakers to explore the themes of the conference, as well as paper presentations with discussants. In this post, we discuss highlights of the conference. The agenda includes links to all of the presentations as well as videos for each session. 

September 27, 2022

Revisiting Federal Student Loan Forgiveness: An Update Based on the White House Plan

On August 24, 2022, the White House released a plan to cancel federal student loans for most borrowers. In April,  we wrote about the costs and who most benefits from a few hypothetical loan forgiveness proposals using our Consumer Credit Panel, based on Equifax credit report data.  In this post, we update our framework to consider the White House plan now that parameters are known, with estimates for the total amount of forgiven loans and the distribution of who holds federal student loans before and after the proposed debt jubilee.

August 9, 2022

Three Key Facts from the Center for Microeconomic Data’s 2022 Student Loan Update

Photo: students in cap and gown graduation ceremony with dollars signs superimposed on the image.

Today, researchers from the Center for Microeconomic Data released the 2022 Student Loan Update, which contains statistics summarizing who holds student loans along with characteristics of these balances. To compute these statistics, we use the New York Fed Consumer Credit Panel (CCP), a nationally representative 5 percent sample of all U.S. adults with an Equifax credit report. For this update, we focus on individuals with a student loan on their credit report. The update is linked here and shared in the student debt section of the Center for Microeconomic Data’s website. In this post, we highlight three facts from the current student loan landscape.

August 2, 2022

Historically Low Delinquency Rates Coming to an End

Total household debt increased by $312 billion during the second quarter of 2022, and balances are now more than $2 trillion higher than they were in the fourth quarter of 2019, just before the COVID-19 pandemic recession, according to the Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. All debt types saw sizable increases, with the exception of student loans. Mortgage balances were the biggest driver of the overall increase, climbing $207 billion since the first quarter of 2022. Credit card balances saw a $46 billion increase since the previous quarter, reflecting rises in nominal consumption and an increased number of open credit card accounts. Auto loan balances rose by $33 billion. This analysis and the Quarterly Report on Household Debt and Credit use the New York Fed Consumer Credit Panel, based on credit data from Equifax.

Posted at 11:00 am in Household Finance | Permalink | Comments (1)
July 11, 2022

Consumer Scores and Price Discrimination

Photo: Woman shopping online with smartphone and making a payment

Most American consumers likely are familiar with credit scores, as every lender in the United States uses them to evaluate credit risk. But the Customer Lifetime Value (CLV) that many firms use to target ads, prices, products, and service levels to individual consumers may be less familiar, or the Affluence Index that ranks households according to their spending power. These are just a few among a plethora of scores that have emerged recently, consequence of the abundant consumer data that can be gathered online. Such consumer scores use data on age, ethnicity, gender, household income, zip code, and purchases as inputs to create numbers that proxy for consumer characteristics or behaviors that are of interest to firms. Unlike traditional credit scores, however, these scores are not available to consumers. Can a consumer benefit from data collection even if the ensuing scores are eventually used “against” her, for instance, by enabling firms to set individualized prices? Would it help her to know her score? And how would firms try to counteract the consumer’s response?

Posted at 7:00 am in Credit, Household Finance | Permalink | Comments (2)
May 23, 2022

The Adverse Effect of “Mandatory” Flood Insurance on Access to Credit

The National Flood Insurance Program (NFIP) was designed to reduce household and lender flood-risk exposure and “encourage lending.” In this post, which is based on our related study, we show that in certain situations the program actually limits access to credit, particularly for low-income borrowers—an unintended consequence of this well-intentioned program.

May 12, 2022

First-Time Buyers Were Undeterred by Rapid Home Price Appreciation in 2021

Photo: young ethnic family looking at a home with house of sale sign and sold over it.

Tight inventories of homes for sale combined with strong demand pushed up national house prices by an eye-popping 19 percent, year over year, in January 2022. This surge in house prices created concerns that first-time buyers would increasingly be priced out of owning a home. However, using our Consumer Credit Panel, which is based on anonymized Equifax credit report data, we find that the share of purchase mortgages going to first-time buyers actually increased slightly from 2020 to 2021.

May 10, 2022

Refinance Boom Winds Down

photo: person signing papers with model house and keys on the table near them.

Total household debt balances continued their upward climb in the first quarter of 2022 with an increase of $266 billion; this rise was primarily driven by a $250 billion increase in mortgage balances, according to the latest Quarterly Report on Household Debt and Creditfrom the New York Fed’s Center for Microeconomic Data. Mortgages, historically the largest form of household debt, now comprise 71 percent of outstanding household debt balances, up from 69 percent in the fourth quarter of 2019. Driving the increase in mortgage balances has been a high volume of new mortgage originations, which we define as mortgages that newly appear on credit reports and includes both purchase and refinance mortgages. There has been $8.4 trillion in new mortgage debt originated in the last two years, as a steady upward climb in purchase mortgages was accompanied by an historically large boom in mortgage refinances. Here, we take a close look at these refinances, and how they compare to recent purchase mortgages, using our Consumer Credit Panel, which is based on anonymized credit reports from Equifax.

Posted at 11:00 am in Household Finance, Mortgages | Permalink
April 21, 2022

What Might Happen When Student Loan Forbearance Ends?

Federal student loan relief was recently extended through August 31, 2022, marking the sixth extension during the pandemic. Such debt relief includes the suspension of student loan payments, a waiver of interest, and the stopping of collections activity on defaulted loans. The suspension of student loan payments was expected to help 41 million borrowers save an estimated $5 billion per month. This post is the first in a two-part series exploring the implications and distributional consequences of policies that aim to address the student debt burden. Here, we focus on the uneven consequences of student debt relief and its withdrawal. With the end-date of the student loan relief drawing near, a key question is whether and how the discontinuation of student debt relief might affect households. Moreover, will these effects vary by demographics?

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