Auto Loans Up, Home Loans Down

August 18, 2014

New home loans dropped to their lowest level this spring since 2000, reports Alan Zibel for the Wall Street Journal. In fact, according to the New York Federal Reserve, outstanding household debt -- which includes mortgages, credit cards and student loans, among others -- dropped $18 billion from April to June 2014, a decline after three quarters of debt increases. The Federal Reserve report notes, however, that student loan balances rose by $7 billion, while credit card debt rose even more, by $10 billion.

While home loans dropped, Americans took out new car loans at the fastest pace in eight years.

  • Auto lending has risen for 13 straight quarters, and the industry saw $101 billion in new loans in the second quarter of 2014.
  • Significantly, riskier borrowers have been taking out auto loans, leading many to worry that the auto loan industry could face high levels of default.
  • According to the Federal Reserve report, the number of new auto loans issued to subprime borrowers has doubled in the five years since 2009.

According to the Wall Street Journal, auto lenders are not concerned about the risk of default. Zibel writes that defaults in the United States are a relatively low levels. Currently, 4.5 percent of overall debt is considered "seriously overdue" -- a low level not seen since early 2008.

Source: Alan Zibel, "Americans Borrow for Cars, Less So for Homes," Wall Street Journal, August 15, 2014. 

 

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