3 crises hitting America.. Expectations of debt default

Americans' debt increased at the end of last year, and their credit card balances rose at record rates.

The Federal Reserve Bank of New York, announced that the total debt of American households reached a record level of $16.9 trillion, during the fourth quarter, an increase of $394 billion, equivalent to an increase of 2.4% over the previous three-month period.

Real estate mortgage

   The lion's share of the debt goes to mortgages, with the report showing that not only are credit card balances swelling at record levels, but delinquencies are also on the rise.

Credit card balances increased by about 6.6% to reach $986 billion during the last quarter of 2022, the highest quarterly growth ever.

According to a report published by the "CNN" network, credit card balances grew by 15.2% over the past year compared to 2021 numbers.

Interest rates

The Federal Reserve has raised interest rates significantly over the past 11 months in an effort to combat high inflation.

The effect of the rise in interest rates on the housing sector, and during the last quarter of last year, mortgage facilities decreased to 2019 levels.

While the historically strong labor market helped maintain consumer spending. However, they are doing so in an environment of historically high inflation and high interest rates.

 Defaulting on debt obligations

   The Congressional Budget Office has estimated that the United States is at risk of defaulting on its debt obligations by next July, if lawmakers fail to break the deadlock and raise the federal borrowing limit.

The expectations of the nonpartisan office that makes recommendations to Congress came at a time when Republicans are threatening not to agree to raise the federal credit limit unless Democrats first agree to make major future budget cuts.

Triple problem

Bankrit's senior industry analyst Ted Rossman says: "It's a triple whammy for credit card borrowers... Balances are rising, interest rates are high, and more people are carrying credit card debt."

  In the environment of inflation and high interest rates, Americans face more problems in meeting repayment obligations. The share of current delinquent debt increased across nearly all debt types, with credit cards and auto loans showing delinquency rates of 0.6 and 0.4 percentage points, respectively.

18 million borrower

At the end of 2022, there were 18.3 million delinquent credit card borrowers, compared to 15.8 million at the end of 2019.

  Researchers at the Federal Reserve Bank of New York see that younger borrowers in particular, those in their twenties and thirties, are struggling to make car loan and credit card payments.

While overall delinquency levels are still lower than seen before the pandemic -- 2.5% of outstanding debt was at some point in delinquency as of December, compared to 4.7% at the end of 2019. But researchers at the New York Federal Reserve They confirmed that this environment is worrying.