Analysis of U.S. Household Credit Risk – Q1 2025

The Federal Reserve Bank of New York recently released its Household Debt and Credit Report for the first quarter of 2025. Today, we take a look at several key points from this report.

Total household debt increased by 167 billion dollars from the previous quarter (0.9% QoQ), reaching 18.2 trillion dollars. Compared with the end of 2019, just before the pandemic, this is an increase of more than 4 trillion dollars. A substantial portion of this increase in debt came from housing-related loans.

Mortgage balances rose by 199 billion dollars to 12.8 trillion dollars, and home equity lines of credit (HELOCs) also increased by 600 million dollars, extending their streak of quarterly growth to 12. In contrast, consumer-related debt showed some signs of adjustment. Credit card balances fell by 29 billion dollars due to seasonal factors, but were still up more than 6% year over year. Auto loans declined by 13 billion dollars, a rare quarterly decrease since 2011, and retail cards and other consumer loans also fell by 12 billion dollars. Student loans were the sole exception, increasing by 16 billion dollars to 1.63 trillion dollars. As a result, total non-housing debt decreased by 38 billion dollars, down 0.8% from the previous quarter.

Loan origination volumes remained stable, led by mortgages. New mortgage originations edged up to 426 billion dollars, and credit limits on credit cards and HELOCs increased by 77 billion dollars and 3 billion dollars, respectively. However, signals were mixed from a credit quality perspective. The credit scores of auto loan borrowers improved, whereas the scores of mortgage borrowers declined slightly, suggesting a possible influx of lower-credit-quality borrowers.

Delinquency rates rose across the board. The share of total debt classified as delinquent climbed to 4.3%, up from 3.6% in the previous quarter. The most notable change occurred in student loans: as student loan delinquencies that had been deferred during the pandemic were once again reflected in credit reports, the share of student loans 90 days or more past due surged from below 1% to 7.7%. Transition rates into serious delinquency (90+ days) increased for mortgages, HELOCs, and student loans, while auto loans and credit cards remained relatively stable.

The number of consumers filing for bankruptcy fell to 105,000, down from the previous quarter, and the share of consumers with accounts in collections held steady at around 4.6%. However, new foreclosure starts reached 62,000, a sharp increase from the prior quarter, highlighting growing instability in the housing market.

In summary, while the overall stock of household debt continues to grow, there are signs of selective tightening in non-housing segments, and the surge in student loan delinquencies and rising mortgage delinquency rates can be interpreted as warning signals of downside risks to the economy.

The increase in the share of nonperforming loans (typically defined as loans with interest payments overdue by 90 days or more) stands out. In just one quarter, the combined share of loans that are 90 days, 120 days, or severely delinquent rose from around 2% of total loan balances to nearly 3%. This means that a growing share of loans is rolling from short-term delinquencies of 30–60 days into serious delinquency, indicating that the number of households struggling to service their debt is rising rapidly.