Americans borrow in the face of inflation and rising late payments

Americans borrow in the face of inflation and rising late payments

US households borrowed more in the second quarter, mainly due to inflation, according to a survey published on Tuesday, but late payments, which have been very low since the start of the pandemic, are on the rise again. “Americans are borrowing more, but most of the increase in borrowing is due to higher prices.”, details the federal researchers in New York responsible for this study, on a blog. Total household debt increased by about $312 billion from April to June, compared to the end of the first quarter (+2%), to reach $16.150 billion. That’s $2 trillion more than it was at the end of 2019, before the Covid-19 pandemic.

“Historically Low Price”

But “Historically low rates of late payment are coming to an end”, warned economists in the blog. Generous financial aid from the federal government has allowed American families to save a lot during the pandemic. these “After most borrowers are gone, some borrowers are starting to show difficulty in repaying their debts.” Delays mostly come in credit card and car loan payments, especially for low-income families. Inflation reached 9.1% in one year in June in the US, a record high for more than 40 years. To limit this, the central bank, the Federal Reserve, tightens its monetary policy, which raises interest rates on loans to households and businesses, so that they consume and invest less, and eventually relieve pressure on prices.

But with this voluntary slowdown in economic activity, fears of a recession have grown. Detailed in the second quarter, the total amount of mortgages outstanding is now $11.390 billion, up 207 billion from three months prior, and 945 billion more than a year ago. Auto loans also rose (+33 billion dollars compared to the end of March, to 1500 billion). The same trend for consumer loans, widely used via credit cards (+46 billion to 890 billion), which is up 13% since the second quarter of 2021, ‘The most important in more than 20 years’Federal Reserve Bank of New York details. On the other hand, student loans essentially remained unchanged, at $1.59 trillion.

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