Consumers slashed their debt and became less reliant on credit to make ends meet in the years following the financial crisis, but that trend is over, according a report released Tuesday by the Federal Reserve Bank of New York.
Consumers have begun taking on higher balances of nonhousing debt, such as auto loans and credit cards, to increase their purchasing power.
"The deleveraging process has ended," the New York Fed said in a supplemental blog post.
Since late 2008, total consumer debt has plunged by $970 billion, to $11.71 trillion in the third quarter of this year. The reduction was driven by a steady pay-down of mortgage balances, though chargeoffs also contributed to the reduction, as lenders removed delinquent loans from their books.
But overall, total consumer debt has risen in four of the last five quarters.And, for the first time since the crisis, consumers in recent quarters have begun to take on higher amounts of nonhousing credit to supplement their monthly budgets.
"Outstanding household debt — led by increases in auto loans, student loans and credit card balances — has steadily trended upward in recent quarters," Wilbert van der Klaauw, senior vice president and economist at the New York Fed, said in a press release that accompanied the report. "In light of these data, it appears that the deleveraging period has come to an end and households are borrowing more."
The findings, which were published as part of the New York Fed's quarterly "Household Debt and Credit" report, reflect recent research on consumer credit.
Data released Monday from TransUnion illustrated a spike in auto lending, showing that debt per borrower increased 3.9% in the third quarter from a year earlier, to $17,352.
Additionally, a recent report from Nomura found that U.S. consumers' willingness to carry monthly credit card balances had reached its highest point since October 2008, at the peak of the crisis.
The New York Fed's report Tuesday showed that indebtedness rose nearly 4% in the third quarter from a year earlier, mostly from higher auto and student loan balances.
Auto originations reached a 10-year high of $105 billion in the third quarter — their highest volume since the third quarter of 2005. Total auto loan balances rose for the fourteenth quarter in a row, to $934 billion, representing an 11% increase from the third quarter of 2013.
Auto loan delinquencies also improved, falling by 20 basis points on a linked-quarter basis, to 3.1%.
Student loans balances jumped 10% from last year, to $1.13 trillion. Credit card balances edged up 1% from the previous year, to $680 billion, encouraged by an increase in credit limits.
Mortgages — the largest component of household debt — increased 3% from a year earlier, to $8.13 trillion. At the same time, foreclosures continued to decline, falling to their lowest levels since the second quarter of 2009.
Home equity lines of credit continued their three-year slide, falling by 4% compared with last year, to $512 billion.