213 posts on "Household Finance"
April 11, 2025
Recent Shifts Seen in Consumers’ Public Policy Expectations
In this post we examine changes in households’ beliefs following the release of the December 2024 SCE Public Policy Survey, finding large shifts in consumer expectations about future changes in fiscal policy. Households assign higher likelihoods to a variety of tax cuts and to reductions in a range of transfer programs, while they assign lower likelihoods to tax hikes and expansions in entitlement programs. We do not find these sharp changes translate into meaningful shifts in median households’ near-term expectations about the evolution of the overall economy, nor do they appear to have significantly affected median near-term expectations about the household’s own income and spending growth.
Posted at 7:00 am in Expectations, Fiscal Policy, Household Finance, Inflation, Student Loans | Permalink
March 31, 2025
Why Are Credit Card Rates So High?
Credit cards play a crucial role in U.S. consumer finance, with 74 percent of adults having at least one. They serve as the main method of payment for most individuals, accounting for 70 percent of retail spending. They are also the primary source of unsecured borrowing, with 60 percent of accounts carrying a balance from one month to the next. Surprisingly, credit card interest rates are very high, averaging 23 percent annually in 2023. Indeed, their rates are far higher than the rates on any other major type of loan or bond. Why are credit card rates so high? In our recent research paper, we address this question using granular account-level data on 330 million monthly credit card accounts.
March 26, 2025
Credit Score Impacts from Past Due Student Loan Payments
In our companion post, we highlighted how the pandemic and subsequent policy actions disrupted trends in the growth of student loan balances, the pace of repayment, and the classification of delinquent loans. In this post, we discuss how these changes affected the credit scores of student loan borrowers and how the return of negative reporting of past due balances will impact the credit standing of student loan borrowers. We estimate that more than nine million student loan borrowers will face significant drops in credit score once delinquencies appear on credit reports in the first half of 2025.
Student Loan Balance and Repayment Trends Since the Pandemic Disruption
This month marks five years since the start of the COVID-19 pandemic, after which subsequent policy responses upended most trends underlying student loans in the U.S. Beginning in March 2020, executive and legislative actions suspended student loan payments and the accumulation of interest for loans owned by the federal government. In addition, federal actions marked all past due and defaulted federal student loans as current, driving the delinquency rate on student loans below 1 percent by November 2022. Payments on federal student loans resumed in October 2023 after forty-three months of suspension. This post is the first of two highlighting trends in balances, repayment, and delinquency for student loans since the beginning of the COVID-19 pandemic and how trends may shift without pandemic supports.
March 6, 2025
When the Household Pie Shrinks, Who Gets Their Slice?
When households face budgetary constraints, they may encounter bills and debts that they cannot pay. Unlike corporate credit, which typically includes cross-default triggers, households can be delinquent on a specific debt without repercussions from their other lenders. Hence, households can choose which creditors are paid. Analyzing these choices helps economists and investors better understand the strategic incentives of households and the risks of certain classes of credit.
February 13, 2025
Breaking Down Auto Loan Performance
Debt balances continued to rise at a moderate pace in the fourth quarter of 2024, and delinquencies, particularly for auto loans and credit cards, remained elevated, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Auto loan balances have grown steadily since 2011, expanding by $48 billion in 2024. This increase reflects a steady inflow of newly originated auto loan balances, which in 2024 were boosted primarily by originations to very prime borrowers (those with credit scores over 760) while originations to borrowers with midprime and subprime scores held roughly steady. In this post, we take a closer look at auto loan performance and find that delinquencies have been rising across credit score bands and area income levels. We also break down auto loan performance by lender type and find that delinquencies are primarily concentrated in loans from non-captive auto finance companies.
February 3, 2025
Are First‑Time Home Buyers Facing Desperate Times?
Based on recent proposals and policy dialogue, it would appear that first-time home buyers (FTB) are indeed facing desperate times. For example, in a recent Urban Institute study, Michael Stegman, Ted Tozer, and Richard Green advocate for a zero-downpayment Federal Housing Administration (FHA) mortgage. They argue that this would be a more efficient way to deliver much needed support to help households transition to homeownership given the challenges of high house prices and mortgage rates.
December 23, 2024
Every Dollar Counts: The Top 5 Liberty Street Economics Posts of 2024
High prices and rising debt put pressure on household budgets this year, so it’s little wonder that the most-read Liberty Street Economics posts of 2024 dealt with issues of financial stress: rising delinquency rates on credit cards and auto loans, the surge in grocery prices, and the spread of “buy now, pay later” plans. Another top-five post echoed this theme in an international context: Could the U.S. dollar itself be under stress as central banks seemingly turn to other reserve currencies? Read on for details on the year’s most popular posts.
Posted at 7:00 am in Household Finance | Permalink
November 13, 2024
Income Growth Outpaces Household Borrowing
U.S. household debt balances grew by $147 billion (0.8 percent) over the third quarter, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Balances on all loan products recorded moderate increases, led by mortgages (up $75 billion), credit cards (up $24 billion), and auto loans (up $18 billion). Meanwhile, delinquency rates have also risen over the past two years, returning to roughly pre-pandemic levels (and exceeding them in the case of credit cards and auto loans), though there are some signs of stabilization this quarter. Are rising aggregate debt burdens sustainable? Or is this expansion to be expected given increases in aggregate income and population size? In this post, we take a look at debt balances scaled by income, tracking the evolution of this ratio over the past twenty-five years.
August 6, 2024
Mortgage Lock‑In Spurs Recent HELOC Demand
Mortgage balances, the largest component of U.S. household debt, grew by only $77 billion (0.6 percent) in the second quarter of 2024, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. This modest increase reflects a substantial slowdown in mortgage origination; only $374 billion was originated during the second quarter, compared to an average of about $1 trillion per quarter between 2021 and 2022. Meanwhile, after nearly thirteen years of decline, balances on home equity lines of credit (HELOC) have begun to rebound, gaining 20 percent since bottoming out at the end of 2021. In this post, we consider the factors behind this upswing, finding that HELOCs have likely become an attractive alternative to cash-out refinancings amid higher interest rates.
Posted at 11:00 am in Household Finance | Permalink
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