The mortgage refinancing boom is winding down and household debt levels are creeping up as consumers edge past the worst of the pandemic’s economic shock.
Mortgage originations dropped sharply in the first quarter of 2022 compared with their 2021 peak, according to a quarterly report on household debt that the Federal Reserve Bank of New York released Tuesday.
Last year’s spike was fueled by refinancings from homeowners chasing exceptionally low rates; as rates have risen, demand has cooled. But the overall amount of mortgage debt for new purchases is generally rising, with soaring home prices forcing buyers to borrow more for their homes.
Consumers are comfortably managing their bills, and the deepest distress signals are hovering at historically low levels, the report said. Around 6 percent of consumers have an account in collections listed on their credit reports, far lower than the double-digit rates that were common in the wake of the Great Recession.
And bankruptcy filings are at a two-decade low: New bankruptcy notices in a national sample drawn from Equifax credit reports hit their lowest level since the New York Fed began tracking it in 1999.
Credit card balances fell $15 billion from the previous quarter — a typical seasonal drop after year-end holiday spending — but were $71 billion higher than a year ago, as consumer spending has stayed strong. And lenders are eager for still more: The total amount of credit Americans have available on their cards rose last quarter and is now at $4.12 trillion, nearly 6 percent higher than its prepandemic level.
American Express said last month that spending on its cards set a record in March, driven especially by pent-up demand for business and leisure travel. In the year’s first quarter, banks eased their standards for card and auto loans and reported stronger consumer demand for credit, according to a Federal Reserve survey released on Monday.
