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Debt Hits New Record In Q1 2017

Debt Hits New Record in Q1 2017The total households debt that American citizens are in now has hit a record high. Since the 2008 shamble, the debt rates and the economy has slowly recovered, albeit under stricter regulations and norms. Hearing something like debt hits new record in Q1 2017 can sound alarming. This time around the news is not something that is to cause alarm. It could be a sign of a healthy and stable economy.

Debt Hits New Record in Q1 2017

After the 2008 recession, the debt habits of Americans was uncharacteristically low. The New York Fed likened this drop in debt to the great depression of the 1920s. The 12% drop after 2009 hit a trough in 2013 and stayed there till the second half of the year. The recovery was slow, but steady. In the first quarter of 2017, debt has grown by 14% as compared to the debt growth the same time last year. As of now, the household debt of the American public stands at $12.725 trillion.

The New York Fed has said that this is neither a reason to celebrate, nor is it a reason to be alarmed. This is because the debt makeup looks quite different from the one in 2008. It is to be treated as an indicator and nothing more.

Mortgage balances increased by 1.7% in Q1 2017 when compared to Q4 of 2016. Home equity lines of credit reduced by 3.6%, automobile loans went up by 0.9%, student loans went up by 2.6%, and credit card debt reduced by 1.9% in the same time period. Without adjusting for inflation, the debt to GDP ratio is still slower than the levels experienced during the 2008 period where domestic debt made up 85.4% of the GDP. Right now, domestic debt takes up only 66.9%.

The main reason for this is the curbing of lending to subprime borrowers, especially home and mortgage related loans. Loans being made available to those below a credit score of 620 make up only 3.6% of the market.

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