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NY Fed: US household debt at highest level since 2008

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More Americans fell behind on their vehicle loan payments in the fourth quarter, bringing auto delinquencies to their highest since the height of the financial crisis, Federal Reserve Bank of NY data released on Thursday showed.

The rising debt indicates that banks are extending more credit to households.

With the increase in the number of delinquencies, the credit quality of loans has also deteriorated drastically.

It is true that the delinquents bring about possible losses to vehicle makers.

Delinquency is a predictor on possible losses for carmakers, which often make low interest loans to attract buyers.

The result of these divergent lending practices had about 1 in 20 auto loans issued by finance companies running at least 90 days in arrears during the fourth quarter, compared with 1 in 100 for auto loans issued by banks and credit unions. The total increase of $460 billion in 2016 was the largest in a decade.

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Auto loan delinquencies in the fourth quarter hit their highest level since the financial crisis, a report out Thursday revealed.

Mortgage debt rose $231 billion (or 2.8 percent) during 2016, along with almost every other form of debt, including auto debt (up $93 billion, or 8.7 percent), credit card debt (up $46 billion, or 6.3 percent), and student debt (up $78 billion, or 6.3 percent).

The increase in late loan payments coincided with drivers loading up on debt to buy the latest vehicle, trunk and SUV models, fueling expectations for record auto sales in 2017. This reflected an increase of around 6 million over the year.

"An increase in delinquency is the natural effect of that strategy", he said.

The average monthly auto payment in the fourth quarter rose above $500 for the first time, according to the credit-rating agency Experian. Credit card debt too rose steeply by $32 billion and now stands at a grand total of $779 billion. Mortgage balances, now at $8.48 trillion, made up 67 percent of the household debt.

A silver lining to all this is that there was a decline of 4 percent in bankruptcy filings from Q4 2015.

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