Auto Borrowing Rises as New Mortgage Loans Sag, New York Fed Says

Chaiyaporn Baokaew/Getty Images

Americans are borrowing more for cars and less for houses, according to a report released Tuesday by the Federal Reserve Bank of New York.

Mortgage originations fell in the fourth quarter of 2018 to $401.5 billion from $445.3 billion in the previous quarter, the lowest level since the first quarter of 2016 in nominal terms. Mortgage originations for all of 2018 were at the lowest level since 2014. Auto loans, on the other hand, have been steadily moving up since 2010. Last year saw the highest volume in new auto loans on record, at $584 billion, according to the report.

The shift could be due to the sagging housing market, which slumped last year after several years of strong sales and rising prices. Now, with higher rates and steep prices deterring buyers, home sales are poised to soften still in 2019. Auto sales, meanwhile, rose rapidly following the recession and have remained strong.

Last year’s growth in auto lending was primarily driven by borrowers with good credit scores, the New York Fed said. As of the fourth quarter, people with credit scores above 760 originated about 30% of outstanding auto loans while subprime borrowers were responsible for 22% of all auto-loan balances.

Overall, U.S. household debt rose by $32 billion to $13.54 trillion in the fourth quarter, the 18th consecutive increase. Household debt levels sagged in the aftermath of the recession as families tried to pay down what they owed. But debt has made a comeback since 2013 and today stands at $869 billion above the previous peak reached in 2008, driven in part by a rise in student and auto loans.

Despite the higher debt loads, Americans appear to be keeping up with their payments. The report found that 95.4% of balances were current, a level that’s roughly on par with prerecession levels.

Mortgage delinquencies have fallen since the financial crisis. In the fourth quarter only 1.06% of mortgage balances were overdue by 90 days or more, down from 8.89% in the first quarter of 2010. Auto-loan delinquencies also remain below their recession-era peak but have been slowly creeping up since 2014. About 4.47% of auto-loan balances were delinquent in the fourth quarter.

But auto delinquencies have been rising for lower-credit households. More than 8% of borrowers with credit scores below 620 became delinquent in the fourth quarter, at annualized rates.

The New York Fed’s quarterly report on household debt and credit is based on data from the credit-ratings firm Equifax.

The post Auto Borrowing Rises as New Mortgage Loans Sag, New York Fed Says appeared first on Real Estate News & Insights | realtor.com®.

from DIYS http://bit.ly/2tknPYp