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Money is cheap. Mortgage rates are cheap. People want bigger and bigger homes. So, why not just borrow more?
Indeed, new data from the Federal Reserve indicates that is exactly what America consumers are doing.
U.S. household debt is rising, touching $14.6 trillion in the latest quarter and it’s primarily being pushed higher via a massive increase in mortgage debt. In the last three months, mortgage debt topped $10 trillion.
It’s a new trend in consumer debt. Within the last year, we’ve seen a rotation out auto and education loans and into mortgage debt. Credit card debt has declined.
It may not be all bad. In the scheme of things, mortgage debt is certainly far better for Americans to maintain than high interest credit card and auto debt–however, there are already increasing questions about the “credit quality” of the mortgage loans being extended to Americans. Can these borrowers really afford the loans? And, what happens when interest rates go up, even if just slightly? How will that effect home prices?
These are real concerns because, let’s face it. No one wants to relive 2008.