US households, according to the Fed. took on new debt of $ 1,02 trillion in 2021, the largest amount in 14 years, at levels not seen before the 2008-09 financial crisis.
The American consumers increased their borrowing to buy more expensive homes, cars and other goods, according to a Feb. 8 report from the Federal Reserve Bank of New York.
Higher borrowing is fueled in part by rising prices as consumers face the strongest inflation seen since the early 1980s.
Meanwhile, central bank leaderships and world leaders have been widely criticized during the inflation crisis.
Debt growth, led by car and mortgage lending, is the biggest jump since jumping to $ 1,06 trillion in 2007, with total consumer debt now at about $ 15,6 trillion, up from $ 14,6 trillion dollars a year earlier.
The total debt balance is now $ 1,4 trillion higher than at the end of 2019.
"The overall balance of new mortgages and car loans has risen sharply in 2021, which corresponds to increases in house and car prices," said Wilbert Van Der Klaauw, the Fed's senior vice president in New York.
Average home prices in the US increased by almost 20 percent in 2021, boosting mortgage balances and punishing many middle-class buyers.
Rising prices for new and used cars have pushed car loan companies to a record $ 734 billion.
More than $ 4,5 trillion in mortgages were created in 2021, the highest level since the Fed began recording the numbers in 1999.
Mortgage balances rose $ 258 billion in the fourth quarter to $ 10,93 trillion at the end of December.
The Fed of New York said 87% of the new debt was linked to homes that could rise in value over time, something that could benefit borrowers.
High-risk borrowers account for just 2 percent of mortgage debt in the fourth quarter of 2021, up from an average of 12 percent in the years before the previous financial crisis.
The rise in consumer debt is not a cause for concern, New York Fed economists said, as households backed by higher savings and higher incomes appear to be handling the heaviest debt burden to date, according to their data.
Financial gains rose to all levels of income during the pandemic, according to a report by the Federal Reserve Bank of New York, although most gains were made by the richest Americans.
Delays in U.S. consumer loans continue to hit record lows, in part due to savings accumulated earlier in pandemic and tolerance programs.
However, borrowers who did less well during the pandemic could find it difficult to keep up with their debt payments later, Fed researchers in New York said.
Student loan payments are expected to resume in a few months.
The Fed of New York said in its quarterly report on household debt and credit that Americans added $ 52 billion to their credit card balances in the fourth quarter of 2021, the biggest quarterly jump yet, but still 71. billions of dollars lower than at the end of 2019.
As a sign that consumers are returning to their spending habits before the pandemic, the 2021 holiday season saw an increase in demand for travel and leisure, boosting credit card balances in the last three months of the year.
Credit card balances fell sharply in early 2020 as a result of spending cuts and the availability of stimulus money that allowed consumers to pay off their debt.
Total credit card balances stood at $ 856 billion at the end of December, up from $ 927 billion two years earlier.
Some borrowers who expect higher interest rates may benefit from lower borrowing costs, Fed researchers said, noting an increase in mortgage refinancing.
The Federal Reserve is expected to start raising interest rates in March and start selling off stimulus bonds as it works to tame inflation.
The Fed's move could boost consumer borrowing costs later this year.
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