Who issues loans in the United States
Commercial banks USA are not the only credit agents, as is the case when Russia over 97% of the loan portfolio structure is concentrated among banks.
In the United States, loans are also issued by mortgage structures and financial companies, and government structures also participate in student loans.
For example, at the beginning of 2023, out of almost $13 trillion of the population's mortgage debt, only $2.5 trillion was issued by commercial banks, and the rest by mortgage structures. In a consumer loan of $4.8 trillion in total debt, commercial banks account for only $2 trillion and another $1.5 trillion to the state through educational loans.
2023
High household debt: 72% of GDP
Credit card arrears hit 13-year record
Credit card delinquencies have reached their highest level in 13 years, according to Moody's Analytics.
At the same time, banks report record profits from credit card lending, as rates have risen sharply.
Interest payments on non-mortgage loans reached $573 billion and for the first time may exceed interest on mortgages
Interest payments to US households on non-mortgage debts for 2023 reached a record $573 billion and for the first time in history is close to exceeding interest payments on mortgage debts ($578 billion).
By the end of the year, American credit card debts soared to $1.13 trillion
American credit card debts reached a staggering $1.13 trillion.
Student debt write-off for another $4.8 billion
US President Joe Biden in December 2023 decided to forgive student loans worth $4.8 billion, easing the situation of more than 80,000 borrowers, including public sector workers and Americans who have been paying off their debts for decades.
Car loan delinquencies hit 30-year record
Car loan delinquencies among Americans have reached their highest level in 30 years.
This is a clear sign of disadvantage in the financial condition of households.
Debt of the largest public non-financial companies in the United States soared to $7.66 trillion
The debt of the largest public non-financial companies in the United States at the end of September 2023 amounted to $7.66 trillion, over 5 years an increase of $2.18 trillion, over 10 years the debt grew by $4.35 trillion according to its own calculations based on corporate reporting.
Debt refers to short-term and long-term debt in loans and bonds of all terms and types.
Among the $7.66 trillion in aggregate debt, nearly a third of debt is concentrated by just three sectors:
- utilities - 12.1% ($924 billion),
- consumer services - 10.6% ($814 billion),
- retail trade - 8.9% ($683 billion).
The main contribution to the growth of debt over the past 10 years was made by only six sectors:
- consumer services - a contribution of 13.1% to the structure of total growth by 4.35 trillion,
- utilities - 11.9%,
- retail - 11.2%,
- technologies - 10.1%,
- medical technology - 9.1%.
Together, 6 of these sectors contributed 63.3% to the total debt growth, or 2.75 trillion over 10 years.
Raw materials companies practically did not participate in debt growth - 2.4% for oil and gas and 0.1% for metallurgists and chemistry (non-resource minerals).
If we estimate debt to revenue, for all companies this ratio is 43.9% (average debt for the last 12 months to total revenue for 12 months), which is slightly lower than the average level in 2017-2019 (46%).
It would seem that everything is fine, Spydell Finance wrote, the debt burden is stable, but surface analysis will not give an answer regarding structural imbalances. For example, before the 2008 crisis, debt to revenue was 30.6%, which is 1.5 times lower than now.
The growth of the debt burden in 2009-2010 and 2020-2021 is mainly associated with a drop in revenue during crises and it is better to estimate normalized values, which are 30-33% 10-15 years ago and 44-47% at the moment.
The volume of loans issued by banks in the United States is approaching $12 trillion
As of August 2023, the current volume of bank loans in the United States is almost $12 trillion.
Mortgage rate in the United States reached 8%, the number of applications collapsed to the level of 1995
In September 2023, the average rate on a 30-year fixed mortgage rose to 7.19% from 7.18%. For the sixth week in a row, the average rate has been above 7%.
In early October, the rate on a 30-year U.S. mortgage climbed to 7.49%, the highest since December 2000.
By mid-October 2023, the number of applications for mortgage lending in the United States reached a 28-year low amid rising rates, fell 6.9% to 166.9. This is the lowest since May 1995. The contract rate on the 30-year fixed mortgage rose to 8%.
By the end of November 2023, U.S. mortgage rates had declined sharply, ending the biggest four-week drop in nearly a year and spurring a new flood of home purchase applications.
$39 billion student debt write-off
In July 2023, it was announced that the US Department of Education would forgive $39 billion in student debt by changing the technical requirement under a long-standing program. The change, announced in July 14, will make more than 804,000 borrowers happy.
The Supreme Court rejected a broader debt relief plan. To obtain the right to forgive debt, borrowers must make payments within 20-25 years.
Average loan rates rise to 6%
As of June 2023, the weighted average loan rates are 6.05% - an increase of 1.9 pp over the year.
9.8% of household income goes to debt servicing
Household debt service ratio - is the ratio of the total amount of required payments on household debt to total disposable income, both for mortgage and non-mortgage debt.
The amount of payments required is the body of the debt plus interest expenses. The debt service ratio is affected by weighted average interest expenses, the amount of outstanding debt, the type of interest rate (mainly a fixed rate), the remaining maturity.
As of Q2 2023, there were about 9.8% of debt servicing expenses from disposable income according to the Fed, which is comparable to average expenses in 2012-2019.
We are talking about almost 5 trillion non-student debt, of which 1.5 trillion are car loans, 1.8 trillion student debt (1.5 trillion under the federal government), and the rest is credit card debt and unsecured non-earmarked loans. Another 13.3 trillion of mortgage debt hangs on households.
For mortgage debt, the service ratio is only 4% compared to a maximum of 7.2% in 4Q07, and for non-mortgage debt - 5.83% compared to a maximum of 6.7% in Q4 2001, and there is no change from 1Q22.
Mortgage rates are fixed, and the volume of mortgage loans issued from 4q22 to 2q23 was insignificant in the amount of total debt in order to affect total expenses.
After COVID-19, there was a moratorium on student loan payments, which was extended several times, and it was canceled only from October 1, 2023, which affected non-student debt, because student loans form 1/3 of the debt.
American household spending rose to $470 billion a year, but that's just 2.4% of disposable income
According to the BEA, interest expenses of American households in June 2022 amounted to $320 billion, and by June 2023 increased to $470 billion per year, which is much higher than the peaks of 2019 (350 billion) and 2007 (300 billion), i.e. growing at a rate of $150 billion per year (from January to June 2023 monthly growth is on average 10 billion).
The rush is rapid, but this is at face value, and the debt burden has grown less intensively, Spydell Finance wrote.
Interest expense relative to nominal disposable income of American households rose to 2.4% by June 2023 (a maximum of Q3 2009), up from 1.7% in June 2022. In 2019, the interest burden was no more than 2.1%, before the financial crisis 2008-2009 this ratio reached 2.8%, and the peak interest burden was about 3% in the 1986 and early 2000s.
These banks have not yet begun to normalize credit rates in accordance with the cost of market funding. Cheap funding in deposits made it possible to get rid of the interbank and raise interest rates on loans at a slower pace and less intensively than the rates on the interbank grew. After March 2023, competition for funding tightened, which began to be reflected in the outstripping growth in loan rates.
Real interest expenses may be higher (possibly BEA is missing), because at that time the US population has about 19 trillion obligations, of which 13 trillion mortgage loans and about 6 trillion other loans (consumer, auto, credit cards, educational, etc.). 470 billion with 19 trillion debt is 2.5% of interest spending, which is obviously not enough.
More and more Americans are using buy now, pay later apps
Americans who use buy now, pay later applications (BNPL/Buy Now, Pay Later) to buy products risk getting into the "debt circle."
With inflation slashing budgets, more consumers are turning to instant lending apps by April 2023 to make ends meet.
Americans owe banks a record $986 billion in credit cards. Total household debt exceeded $16.9 trillion
As of February 2023, American credit card debts reached $986 billion - a record in the entire history of observations since 1999. The total debt of households exceeded $16.9 trillion, follows from the Fed report.
2022
Debts of American families increased by 7.6% and exceeded $16 trillion
On January 10, 2023, NerdWallet published a study according to which the average American family by the end of 2022 had a debt of $165 thousand.
The debt of the average household increased the total amount of national debt to $16.5 trillion, which is 7.65% more than in 2021. U.S. debt rose in part because the cost of living outpaces revenues, the study said.
NerdWallet found that credit card balances carried over from month to month rose in 2022 to now roughly $460 billion. Mortgages, car loans and total debt also rose, while student loans fell slightly.
 | Credit card debt is often considered the result of frivolous spending, but for many Americans it is not. Consumers feel the pressure of rising prices and interest rates, and salaries simply do not keep up with them. That forces many to make difficult decisions, such as going into debt to pay for the essentials, says Sarah Ratner, credit card expert at NerdWallet. |  |
In 2022, the average family in the United States had a mortgage debt of $222 thousand, credit cards - $17 thousand, as well as car loans - $29 thousand. The authors of the study found that the debt of the average American household on student loans is $58 thousand, which is 0.6% less than in 2021.
Researchers surveyed more than 2,000 U.S. adults to determine how people feel about their debts and future finances. The survey results were used in a study published on January 10, 2023. NerdWallet analysts used data from the U.S. Bureau of Labor Statistics and the Federal Reserve Bank of New York to analyze the change in household debt for 2022. Median household income rose by just 4% in 2022, while the total cost of living increased by 8%, according to the study[1]
Record loan growth in U.S. history as bond and stock offerings collapse
The credit impulse in the United States is the largest in history - the growth of the loan portfolio (population + business) amounted to $1.1 trillion per year (through Q3 2022 inclusive), which is 65% higher than the peak lending rates in 2006-2007 and 2.5 times higher than the dock-like rates.
The growth in lending in the second quarter of 2020 (the emission is visible on the graph) was associated entirely with state guarantees and state programs of the state, the implementation of which was entrusted to US banks, so the comparison of 2020 will be unrepresentative.
Then almost all loans were distributed among business in the United States (mainly non-public companies with revenues of up to $500 million).
In 2022, everything is different. Lending rates in relative terms correspond to peak rates in the credit boom era 2004-2007 (about 10% per annum) - this is a lot.
The reason for the growth in lending was repeatedly described earlier. Corporate bond offerings, especially junk ratings, hit zero, as did primary, secondary stock offerings. The capital market for business is closed due to the degradation of financial conditions, including due to very negative real rates.
The only possibility of covering cash gaps is bank loans. A forced measure, the business performs these operations reluctantly.
The growth of retail lending is associated with three reasons - inflation expectations, the cost of loans is lower or comparable to the level of inflation and income growth, plus the collapse of real income after the shutdown of helicopter money. The population is forced to take loans in order to maintain a familiar, albeit unsecured lifestyle.
The average rate FRS in Q3 2022 was 2.36%, and the change from Q1 2022 is plus 2.07 pp, while the weighted average interest rates on loans increased from 4.07% to 4.98% (2.3 times slower than the Fed rates), and deposit rates increased from 0.11% to 0.54% (more than 5 times slower).
So the answer to the question is why lending is growing - the cost of funding for banks at zero, they can manage credit rates in isolation from the DCP Fed, the Spydell Finance channel noted.
U.S. mortgage rates top 7.16% for first time in decades
U.S. mortgage interest rates jumped to 7.16% by the end of October 2022, the highest level since 2001.
Earlier, at the end of September 2022, 30-year mortgages in the United States went above 7%.
Earlier in mid-September 2022, mortgage rates in the United States for the first time in 14 years exceeded 6%. This was largely due to inflation, which the Federal Reserve (Fed) has failed to contain.
state A 30-year fixed-rate mortgage - the most popular type of mortgage in the U.S. - has an average rate of 6.02% since Sept. 15, 2022, nearly double the nine-month rate, according to data released by mortgage corporation Freddie Mac. There have been no such high indicators since November 2008, and in 2020 the indicator was at a historical minimum (below 3%).
The composite MBA market index, which measures the volume of mortgage applications, declined 1.2% from the previous week on September 3-9, 2022, and 64.0% from the same period last year. The MBA refinancing index fell 4.2% for the week and 83.3% for the year.
Having bought a house worth $500 thousand with an initial payment of $100 thousand and a mortgage for the remaining amount at 6.02%, the American on average will pay interest on a loan in the amount of $465 thousand over 30 years, according to Bankrate.com. A year ago, overpayment on mortgages would have amounted to about $200 thousand.
The growth of the mortgage rate is felt throughout the housing sector, emphasizes Reuters. Sales of new homes fell to a six-year low, and demand in the secondary market fell to a two-year low. Residential property prices remain high anyway, however, due to a shortage of affordable housing, making a collapse in market value unlikely.
Freddie Mac calculates average rates based on data from about 80 mortgage-lending organizations across the country. Rates do not take into account potential fees and other mortgage-related payments.[2]
Mortgage rates rise to 5.27% for the first time since 2009 due to inflation rise
By early May 2022, U.S. mortgage rates jumped to 5.27%, the highest since 2009.
By mid-April 2022, U.S. mortgage rates reached 5% for the first time since early 2011. The increase is associated with a rise in inflation, which was the result of US sanctions imposed against Russia against the background of Russia's special operation in Ukraine.
Record growth in consumer debt over 20 years to above $15 trillion
In February 2022, consumer debt grew in the United States at the fastest pace in 20 years. According to the latest Federal Reserve data, total consumer debt in the country in the last month of winter grew by $41.8 billion, which is 11.3% year-on-year, a record high since November 2001. Analysts had forecast a modest gain of $15 billion.
At this time, Americans owe a total of $4.48 trillion in consumer loans.
Federal Reserve data on consumer debt includes credit card debt, student loans and auto loans, but does not include mortgage debt. If you include mortgages here, it turns out that American consumers are buried under more than $15 trillion in debt.
In February, Americans were rapidly spending money from their credit cards. Revolving credit, primarily credit card debt, rose by a whopping 20.7%. In February alone, American consumers added $18 billion in debt to their credit card bills. The combined credit card debt of U.S. residents at this time is more than $1.06 trillion.
The combined volume of annual interest payments on U.S. debt has already grown by $16.4 billion in just six months. With interest rates rising, Americans will soon be paying more and more each month.
According to Axios, "stimulating payments to American families in the era of COVID-19 is a distant memory, as is the savings cushion that they briefly created. And remember, this data was obtained before the strongest jump in gas prices. "
Non-revolving loans, including student loans and auto loans, jumped $23.8 billion in February, up 8.4% year-on-year. Americans now owe $3.4 trillion in non-renewable debt. A surge in borrowing on student loans led to an increase in the total.
At the height of the pandemic in 2020, Americans in general did not take their credit cards out of wallets and even paid off the debt body. This is typical consumer behavior during an economic downturn.
At the start of the pandemic, credit card balances exceeded $1 trillion, then they fell below this level. We saw a slight increase in credit card balances in February and March 2021, when the recovery began, with a sharp drop in April, when Washington began handing out another portion of checks. But in May, Americans began to take loans seriously again, and since then we have seen a steady rise in consumer debt, culminating in the February rise, which turned out to be a record in recent decades.
Federal Reserve officials say they will be able to raise interest rates and tighten monetary policy because the U.S. economy is strong. But rising levels of debt seem to indicate that visible economic power is a smokescreen. The use of credit cards is not a sustainable economic model. Americans can make ends meet by borrowing money for a while, but credit cards have limits, and rising interest rates will bring the U.S. population closer to them even faster.
The Federal Reserve and the U.S. government built a post-pandemic "economic recovery" on stimulus and debt. It's based on consumers spending money that the U.S. federal government has borrowed and distributed, or using their own credit cards.
And now the incentives are gone.
2021: Experian: The average debt of every American is valued at $93k.
In November 2021, the credit bureau Experian published a study from which it became known that consumer debt USA in reached $14.88 trillion, or about $93 thousand per citizen of the country.
To compile the report, Experian analyzed its credit database and found out the average debt indicators:
- young people aged 25 to 40 years on average owe $87 thousand;
- the average student loan debt is $38,877;
- average car loan debt - $19,011;
- the average personal loan debt is $12,306.
It is noted that 81% of young families in the United States have a total debt of $2 trillion. Three-quarters of that money comes from education debt.
So far, most millennials - those aged 25 to 40 - have no plans to send children to university, so they should focus on their own debt, says Bankrate's chief financial analyst Greg McBride.
| | You should not take on large loans to pay for the education of your children, the expert advises. | |
According to the Federal Reserve Bank of New York, the debt burden of the US population in the second quarter of 2021 grew at the fastest pace in eight years - it increased by 2.1%, and the total amount of citizens' obligations approached $15 trillion.
The largest contribution to the increase in debts was made by mortgages - the amount of such loans increased by $282 billion - to $10.44 trillion by the end of June 2021. At the same time, millions of Americans, according to experts, are not able to pay for house rentals and mortgages, despite government assistance. Most US residents were unable to postpone funds for future housing payments, as unemployment benefits and lump sum payments from the state were spent on more expensive goods and services.[3]
2020: The rise of lending under state guarantees amid the COVID-19 pandemic
From March to June 2020, against the background of the beginning of the COVID-19 pandemic, bank lending increased significantly - by almost $900 billion or 9%, but almost completely this growth was provided by corporate credit under state guarantees.
2019: Household debt $14.15 trillion
Fourth quarter: $14.15 trillion
The total debt of American households, including mortgages, car loans, credit cards and student debts, for the first time exceeded $14 trillion. This is $1.5 trillion more than at the height of the Great Recession.
However, the delinquency rate is significantly lower than before the Great Recession (4.7% versus a peak of 11.9% at the end of 2009), indicating that today's debt load is not as alarming.
Third quarter: $13.95 trillion
The total debt of American households, including mortgages, car loans, credit cards and student debt, rose to $13.95 trillion in the third quarter of 2019, eclipsing the level of debt at the height of the Great Recession in the 3rd quarter of 2008 by $1.28 trillion in nominal terms.
2017: $12.73 trillion
The total debt of US households increased in the first quarter of 2017 by 1.2% in annual terms to a record $12.73 trillion, the Federal Reserve Bank of New York reported.
American debt has been growing over the past three years, before that it was shrinking. In particular, American mortgage debts increased in January-March by $147 billion to $8.63 trillion, on student loans - by $34 billion to $1.34 trillion, on car loans - by $10 billion to $1.17 trillion.
At the same time, the volume of loans issued on the security of houses decreased by $17 billion to $456 billion, and the debt of Americans on credit cards decreased by $15 billion to $764 billion.
"We should not be overly optimistic about this indicator. In principle, the growth of loans speaks of optimism. However, in fact, families borrow to pay for things that they do not have enough income to buy, "said Heather[4], senior economist and executive director of the Washington Center for Equitable Growth, a nonprofit[4].
According to MarketWatch, published in early 2017, "about 50% of people in the US are frustratingly unprepared for a financial emergency. Almost one in five (19%) Americans do not have savings that will cover unexpected emergency costs, one in three (31%) Americans do not have and $500 deferred to cover unexpected costs, according to a survey published by HomeServe USA. A study by insurer MetLife found 49% of employees were "concerned about their current financial situation."
The lack of savings, of course, is directly related to the rising cost of living compared to the lack of wage growth over the past 35 years, which has led to a massive increase in debt to maintain living standards[5] the[5].
Notes
- ↑ US households’ debt rises to $16.5 trillion
- ↑ Mortgage rates surpass 6 percent for the first time since 2008
- ↑ Here's how much debt millennials have on average
- ↑ 4,0 4,1 [http://www.vestifinance.ru/articles/85525 Bush
- ↑ 5,0 5,1 [http://www.vestifinance.ru/articles/83857. Americans will have to go through
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