May 14, 2019 / 3:05 PM / 2 months ago

New U.S. mortgage and auto loan balances fall in 1st quarter

NEW YORK, May 14 (Reuters) - Lenders extended less new credit for people to buy homes and cars in the first three months of the year, according to data that raises questions about how much U.S. consumers can contribute to economic growth this year.

New mortgage and auto loan balances both declined from the fourth quarter of 2018, according to the Federal Reserve Bank of New York’s quarterly report on household debt and credit.

The figure for mortgage originations, a measure of new mortgage balances on consumer credit reports, was $344 billion in the quarter that ended in March, the lowest since the third quarter of 2014.

The report published on Tuesday showed that total U.S. household debt grew to $13.67 trillion, nearly $1 trillion higher than the one-time record of $12.68 trillion going into the 2008 financial crisis. It has risen consistently since 2013, when debt bottomed out after the last recession.

A shift showing less willingness or ability to spend on big-ticket items would be a bad sign. Since a financial crisis driven by problems in mortgage markets, lenders have been more cautious in extending credit. Today only 10% of mortgages are being created for borrowers with credit scores under 647, which is considered “fair” credit.

One of the big questions hanging over the economy now is whether consumers emboldened by job gains and somewhat higher wages are going to spend. Excluding trade, inventories and government spending, the U.S. economy grew at only a 1.3 percent rate in the first quarter, the slowest since the second quarter of 2013. Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, slowed during the quarter.

But a consumer spending figure for the month of March alone, produced by the Commerce Department, increased by the most in more than 9-1/2 years as households stepped up purchases of motor vehicles. That sent a positive signal for growth into the second quarter.

However one sign of consumer demand, credit inquiries within the past six months, slipped to the lowest level recorded by the New York Fed.

While delinquency rates are steady, 90-plus day delinquencies for credit cards and auto loan balances have been rising, and problem student loans remain high. (Reporting by Trevor Hunnicutt; Editing by Andrea Ricci)

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