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US households had record debt when the coronavirus hit. Things are likely to get worse

May 5, 2020. Summarized by summa-bot.

BAYONNE, NJ - MAY 3: A wind blown American flag at the Tear Drop 9/11 Memorial flies over the skyline of New York City as the sun sets on May 3, 2020 in Bayonne, New Jersey. (Photo by Gary Hershorn/Getty Images)

Before the coronavirus pandemic spooked the stock markets, shook the economy and turned the financial lives of millions of people upside down, household debt in the US had already hit a record high.

Before the coronavirus pandemic spooked the stock markets, shook the economy and turned the financial lives of millions of people upside down, household debt in the US had already hit a record high.

The New York Federal Reserve reported Tuesday that debt held by US households rose by 1. 1% to $14. 3 trillion during the first quarter.

The report looked at consumer debt and credit data as of March 31.

But given the month lag in reporting by the credit accounts used in the analysis, the report does not reflect the potential impact in the second half of March.

"It is critical to note that the latest report reflects a time when many of the economic effects of the COVID-19 pandemic were only starting to be felt," said Andrew Haughwout, a senior vice president at the New York Fed.

Before the pandemic hit, the unemployment rate was historically low and low interest rates helped encourage consumers to spend.

Mortgage balances, which are the largest component of household debt, rose $156 billion in the first quarter to $9. 71 trillion.

About 0. 9% of mortgage balances became 30 or more days delinquent and about 75,000 homeowners had a new foreclosure notation added to their credit reports during the first quarter, the Fed reported.

One silver lining in the report: There was a $34 billion decline in credit card balances during the first quarter, that was larger than that seen in the same period last year.

Credit standards tightened slightly in the first quarter as the median credit score of new auto and mortgage borrowers rose compared to the final quarter of 2019.

Outstanding student debt stood at $1. 54 trillion in the first quarter, an increase of $27 billion from last quarter.

Auto loan balances stood at $1. 35 trillion, an increase of $15 billion from the last quarter.

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