May 16, 2023: Total consumer deficit reached a new high in the initial quarter of 2023, pushing the previous $17 trillion despite a sharp pullback in home borrowing.

On Monday, the total for borrowing all over the categories hit $17.05 trillion, an addition of nearly $150 billion, or 0.9%, during the January-to-March period, the New York Federal Reserve conveyed. That took total indebtedness up regarding $2.9 trillion from the pre-Covid period completed in 2019.

That increase came even though new mortgage originations, including refinancings, totalled just $323.5 billion, the lowest level since the second quarter of 2014. The total was 35% less in the fourth quarter of 2022 and 62% below the similar period a year ago.

New home loans peaked at $1.22 trillion in the second quarter of 2021 and have fallen since interest rates have increased. A series of Fed rate cuts helped push 30-year mortgage rates to a low of around 2.65% in January 2021.

But rates are nearly 6.4%, as the central bank has enacted ten rate increases totalling five percentage points to fight inflation, according to significant bank data through Fannie Mae. The higher rates helped push total mortgage debt to $12.04 trillion, up 0.1 percentage points from the fourth quarter.

Borrowers had used the previously lower rates to buy new homes and refinance, the latter witnessing a boom that appears to have ended.

“The mortgage refinancing boom is done, but its effect will be noticed for decades to reach,” Andrew Haughwout, director of household and public policy analysis at the New York Fed, said accompanying the document.

Fed data stated that about 14 million mortgages were refinanced during the pandemic, which began in March 2020. Some 64% were considered “rate refinances,” or homeowners searching for lower borrowing costs. According to the New York Fed, average savings totalled about $220 per month for those borrowers.

“Due to significant equity drawdowns, mortgage borrowers decreased their annual things by tens of billions of dollars, which gives additional funding for spending or pay downs in other debt categories,” Haughwout said.

Despite rising rates, mortgage foreclosures remained low. Delinquency rates for all debt increased, up 0.6 percentage points for credit cards to 6.5% and 0.2 percentage points for auto loans to 6.9%. Total delinquency rates increased by 0.2 percentage points to 3%, the highest since the third quarter of 2020.

Student loan debt increased to $1.6 trillion, and auto loans nudged up to $1.56 trillion.