Total household debt was over $1.6 trillion higher than the previous peak in 2008 even before the full force of the coronavirus pandemic government shutdowns hit the economy.
Household debt increased by $155 billion (1.1%) in Q1 to a total of $14.3 trillion, according to the latest data released by the New York Fed. The previous peak was $12.68 trillion in the third quarter of ’08 in the early days of the financial crisis.
The national debt has pushed above the $22 trillion mark, but it’s not just Uncle Sam borrowing himself into oblivion. US household debt climbed to a record $13.54 trillion in the fourth quarter of 2018, according to a report released by the Federal Reserve Bank of New York.
Total household debt (including mortgages) now stands $869 billion higher than the previous peak of $12.68 trillion in the third quarter of 2008 (right before the crash) and 21.4% above the post-financial-crisis trough reached in the second quarter of 2013.
Climbing interest rates are putting the squeeze on the mortgage refi market. Applications to refinance home mortgages fell 5% last week, dropping to an 18-year low.
According to CNBC, mortgage application volume was nearly 27% lower than a year ago when rates were lower. The refinance share of total mortgage application volume fell to its lowest level since August 2008, at just 35.3%.
As Peter Schiff pointed out in a recent podcast, this is a bad sign for the broader economy. With rising rates, US consumers will no longer have the option of using their house as an ATM.
As Ron pointed out, it’s hard to keep up with all of the distortions in the marketplace thanks to a decade of Federal Reserve easy money.
How do you cover all the bubbles? The nature of what the Fed does by manipulating interest rates to lower than the market rate, everything has to be affected to some degree by a bubble and a distortion and a malinvestment, and excessive debt.”
The Federal Reserve bumped up interest rates another 25 basis points this week. The target federal funds rate now stands at 1.75%.
“Well, OK,” you might be thinking. “But this is just a bunch of wonkish policy stuff. What’s it to me?”
In a nutshell, it means your debt is going to cost you more. And that’s not good in an America where household debt has spiraled to record levels.