Household debt fell in the second quarter as consumers stuck at home because of the coronavirus pandemic spent less on their credit cards, based on a new report from the Federal Reserve Bank of New York.
That may seem surprising on face value, with millions of American workers out of jobs and the economy experiencing a sharp recession caused by shutdowns meant to contain the virus. But the Fed’s findings, released Thursday, contribute to a growing body of evidence that suggests the government’s rescue programs and bill deferrals helped to keep many families from falling far behind financially during the early months of the pandemic.
Total household debt decreased between April and June, falling by $34 billion or 0.2 percent. It was the first decline since 2014 and the largest since 2013.
Credit card balances plummeted by $76 billion, the steepest drop on record.
Mortgages were another story entirely. Refinances and other originations boomed after the Fed slashed interest rates to near-zero in March, reaching $846 billion — the highest volume since 2013.
But there are signs that those cheap home loans are going to only the most creditworthy borrowers. Credit scores at origination ticked up sharply.
Debt delinquency rates dropped across credit categories. The New York Fed said that was “likely reflecting the impact of government stimulus programs and various forbearance options for troubled borrowers.”