May 5, 2020 / 3:05 PM / a month ago

U.S. household debt reached $14.3 trillion, credit standards tightened in first quarter

FILE PHOTO - A U.S. Dollar note is seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration

(Reuters) - American households added $155 billion of debt in the first quarter and overall debt levels rose to a new record at $14.30 trillion, the Federal Reserve Bank of New York said on Tuesday in a report that provides a snapshot of where household balance sheets stood before the coronavirus pandemic brought much of the economy to a halt.

Mortgage balances rose by $156 billion from the fourth quarter to $9.71 trillion. But access to credit overall tightened slightly in the first quarter and other types of debt declined.

The report provides a snapshot of consumer data as of March 31. But since credit accounts are updated once a month, the data may not fully reflect the effects of the pandemic, which led to widespread shutdowns and job losses in the second half of March.

“It is critical to note that the latest report reflects a time when many of the economic effects of the COVID-19 pandemic were only starting to be felt,” said Andrew Haughwout, senior vice president at the New York Fed.

Credit card balances and other types of debt declined by $39 billion, a larger drop when compared to the same period last year. Mortgage originations for purchases and refinancing, along with new auto loans, were down from the fourth quarter. And the median credit score for people taking out new auto loans and mortgages was higher in the first quarter than it was at the end of 2019.

Researchers said more analysis is needed to determine whether these changes were related to the pandemic. “We will continue to monitor these developments and the broader state of household balance sheets closely as key data are updated and the economic situation evolves,” said Haughwout.

New York Fed researchers also analyzed how access to credit varied for households based on their income. About 60% of households in the lowest income zip codes had credit cards, compared to 75% of people in higher income zip codes, they found.

People in lower income areas also had significantly less credit available, the researchers wrote in an accompanying blog post.

For example, people in zip codes where the average adjusted gross income is below $45,000 had a median of $1,900 in available credit. Consumers in some areas had only a few hundred dollars of credit available. In the highest income areas, however, the median credit card holder had $14,000 available.

Reporting by Jonnelle Marte; Editing by Chizu Nomiyama

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