Household debt levels surpass $17T in Q3 as credit card debt soars

Published

1 year ago

November 10, 2023

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US total household debt levels continued to rise in the third quarter, amid a surge in credit card debt tied to a hot economy, while borrowing troubles increased in a way that if sustained could signal looming turbulence for the economy, a report from the Federal Reserve Bank of New York released Tuesday said.

In its quarterly report, the bank said overall debt levels increased by 1.3% during the third quarter to a level of $17.29 trillion. And in that rise, credit card borrowing levels rose by 4.7% to $1.08 trillion.

Credit card balances experienced a large jump in the third quarter, consistent with strong consumer spending and real GDP growth, said Donghoon Lee, a New York Fed economist, in a press release accompanying the report.

US economic activity in the third quarter took placeat a blistering pacefew economists expect to be repeated in the final three months of the year. Overall activity rose at a well-above-trend pace of 4.9%, the fastest such gain in two years, in an environment where the Fed was raising rates and overall borrowing costs broadly rose.

The surge in borrowing costs has waylaid activity in the housing market amid the highest mortgage rates in decades, and the landscape has fueled worries that many Americans will struggle to manage their debt, especially as high levels of savings during the coronavirus pandemic run down. The New York Fed report found credit issues are rising, albeit from low levels.

Overall debt delinquency increased by 3% as of September from a 2.6% increase in the second quarter, the report said, while still standing below the 4.7% delinquency rate seen in the fourth quarter of 2019, just ahead of the pandemics arrival.

The overall flow of debt moving into delinquency stood at 1.28% in the third quarter, compared to 0.94% in the third quarter of last year. The report said increases in credit card delinquency rates were most pronounced for those aged between 30 and 39.

The continued rise increditcarddelinquency rates is broad-based across area income and region, but particularly pronounced among millennials and those with auto loans or student loans, the economist noted.

In a blog posting that came with the report, New York Fed economists said the rise in credit woes is puzzling given the generally solid state of the economy.

Pinning an explanation on the delinquency rise is difficult and whether this is a consequence of shifts in lending, overextension, or deeper economic distress associated with higher borrowing costs and price pressures is an important topic for further research,” the post said.

The New York Fed report found that overall student loan debt rose by $30 billion to $1.6 trillion in the third quarter. The banks data on this type of borrowing arrived after the restart of student loan debt payments, which had been put on hold during the pandemic. The resumption of those payments has been a source of concern, butrecent New York Fed researchhas suggested only modest economic headwinds are likely to result.

Newly created mortgages totaled $386 billion in the third quarter, while the overall level of mortgage balances rose by $126 billion to $12.14 trillion as of the end of September.

The report said auto loan balances were up by $13 billion in the third quarter at $1.6 trillion, continuing the upward trajectory that has been in place since 2011.

Business

Energy bills to rise again from January but spring falls to come, research firm Cornwall Insight forecasts

Published

28 mins ago

November 18, 2024

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Energy bills to rise again from January but spring falls to come, research firm Cornwall Insight forecasts

Energy bills are to rise again next year, according to a respected forecaster.

Costs from January to March are projected to rise another 1% to £1,736 a year for the average user, according to research firm Cornwall Insight.

The energy price cap, which sets a limit on how much companies can charge per unit of electricity, is also expected to rise, costing typical households an extra £19 a year.

It’s a further increase after energy costs rose 10% from October.

After the latest hike, there were hopes of a fall in the new year, but volatile wholesale gas and electricity markets are still above historic average costs.

Money blog: Supermarket-own champagne beats expensive brands in taste test

Prices have gone up due to supply concerns arising from Russia‘s war in Ukraine, and maintenance of Norwegian gas infrastructure.

But spring is expected to herald a reduction as is October 2025, Cornwall Insight said.

Every three months energy regulator Ofgem revises the cap based on wholesale costs.

The official January price cap announcement will be made on Friday.

It comes as millions of pensioners lost their automatic winter fuel allowance payment after the government means-tested the benefit.

Meanwhile, Cornwall Insight’s principal consultant Dr Craig Lowrey warned “millions” of households won’t heat their homes to “recommended temperatures, risking serious health consequences” with bills on the rise.

“With it being widely accepted that high prices are here to stay, we need to see action,” he said, suggesting options like cheaper rates for low-income homes, benefit restructuring, or other targeted support for the vulnerable “must be seriously considered”.

The energy price cap system is being reviewed by Ofgem with possible changes to the standing charge coming over the next year.

The long-lasting solution to high energy bills is the transition to UK-produced renewable power, the firm said.

“While there will be upfront costs, this shift is essential to building a sustainable and secure energy system for the future.”

UK

Masked burglars ‘raid’ Windsor Castle grounds ‘while William, Kate and children slept at home on estate’

Published

28 mins ago

November 18, 2024

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Masked burglars 'raid' Windsor Castle grounds 'while William, Kate and children slept at home on estate'

Masked burglars have stolen farm vehicles from the Windsor Castle estate while members of the Royal Family are believed to have been asleep nearby.

Two men scaled a 6ft fence on the night of 13 October and used a stolen truck to break through a security gate, The Sun first reported.

The pair then fled with a pick-up and a quad bike that were stored in a barn.

The King and Queen were not in residence.

But the Prince and Princess of Wales, along with their three children George, 11, Charlotte, nine, and six-year-old Louis were believed to have been in their home, Adelaide Cottage, on the estate, according to The Sun.

The family moved there in 2022.

In a statement, Thames Valley Police said: “At around 11.45pm on Sunday 13 October, we received a report of burglary at a property on Crown Estate land near to the A308 in Windsor.

“Offenders entered a farm building and made off with a black Isuzu pick-up and a red quad bike. They then made off towards the Old Windsor/Datchet area.

“No arrests have been made at this stage and an investigation is ongoing.”

On Christmas Day 2021, a man climbed a fence at Windsor Castle armed with a crossbow and claimed he wanted to kill Queen Elizabeth II.

Jaswant Singh Chail was handed a nine-year custodial sentence for treason, possession of an offensive weapon and making threats to kill.

UK

UK told to expect ‘disruptive snow’ as warnings cover large parts of country

Published

28 mins ago

November 18, 2024

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UK told to expect 'disruptive snow' as warnings cover large parts of country

The UK is braced for “disruptive snow” as yellow weather warnings cover large parts of the country until Tuesday – with the Met Office saying there is the “potential” for the alerts to be “escalated”.

The forecaster has warned up to 20cm of snow may accumulate in the worst affected areas as the country experiences its “first taste of winter”.

The Met Office has also told people to expect ice, cold temperatures and wintry showers this week.

Check the forecast in your area

A yellow warning for snow and ice is in place for much of the north of the country – covering areas in the East Midlands, Yorkshire, Wales and the north of England – from 7pm on Monday night to 10am on Tuesday morning.

Those in the impacted areas have been told power cuts are possible and mobile phone coverage might be affected.

The Met Office has said there is a “slight chance” some rural communities could be cut off and that bus and train services may be delayed or cancelled.

People are also warned to be careful not to slip or fall on icy surfaces.

The Met Office has said there will be bright spells across northern and eastern areas throughout today, but rain in the south and west will gradually spread northeastwards and turn to snow over northern hills.

Tom Morgan, Met Office meteorologist, said: “We could see some disruptive snow in the Pennine regions, in particular, the Peak District as well, especially Monday night, but we could well see some impacts lasting on until Tuesday morning’s rush hour.

“Even down to lower levels, we could well see some snow as well, so quite a bit of disruption possible by Tuesday morning, and then the week ahead is likely to stay cold nationwide, a windy day on Tuesday, and then winter showers through the week ahead.”

Mr Morgan said that despite a “mild” start to the month, the cold conditions are more typical of “mid-winter to late-winter”.

“What we can say is that it’s going to be very cold for the time of year, there will be widespread overnight frosts, and a few locations where there’s snow on the ground,” he continued.

Meanwhile, a yellow snow and ice weather warning that came into force at 4pm on Sunday will end at 11am this morning.

The warning covers the northern tip of Scotland and people there have been told there may be icy patches on some untreated roads, pavements and cycle paths.

The Met Office has said there is “potential” for both yellow warnings to be “escalated”.

In southern England, a typical maximum temperature for this time of year is 11C (52F), but daytime highs for the week ahead are forecast to be around 5C (41F), while some parts of Scotland will reach “only just above freezing”, Mr Morgan said.

The meteorologist said the public can best prepare for the wintry weather by checking their cars are suitable for icy and potentially snowy conditions and to take extra supplies including food, blankets and a fully charged mobile phone with them on journeys.

He added there were “likely” to be changes to the weather warnings in the coming days, and that “winter flurries” could be seen in the south of England later in the week.

Despite the cold conditions, the “whole of the UK” will enjoy more sunshine this week, the meteorologist added.

He said: “There’ll be some snow showers in the peripheries of the UK, particularly northern Scotland, and down the east and the west coast, but if you live inland and you live in the south, there’ll be lots of sparkly blue skies on the most days through Tuesday to Friday.”

It comes as a cold weather alert issued by the UK Health Security Agency, which was introduced at 9am on Sunday, will be in place until 9am on Thursday.

It covers a large area of England, north of Northhampton. The alert is triggered when there is a risk that healthcare services might face extra pressure and is designed to prepare those who are “particularly vulnerable” and “likely to struggle to cope”.