The Federal Reserve Bank of New York released their quarterly evaluation of the credit markets, and they are reporting some good news for consumers. Total consumer debt dropped $50 billion since last quarter, ending at $11.4 trillion on June 30. Mortgage balances and home equity credit balances declined, contributing to the overall decrease. Debt not related to real estate stands at $2.28 trillion, 9.5 percent below the peak in 2008.
Consumers are still reducing their debt as they have been since the start of the recession and credit crunch, but this process has slowed down a little. The volume of credit card accounts has increased, and so has the number of credit inquiries. For those who have credit cards, the issuers have increased available credit limits. These are signs that consumers are seeking more credit now and issuers are somewhat willing to comply.
Delinquencies have decreased this quarter. 90 percent of outstanding loans are current, the highest level since 2008.
With some signs that the credit market is thawing, a broader economic improvement might be around the corner. With access to credit, a willingness to use that credit, and a general impression among the public that the future will be brighter, the economy could improve. The biggest effect that might have is the willingness among businesses to hire more employees, increased salaries, and perhaps even a recovery in the real estate market.
Updated September 8, 2016 and originally published August 16, 2011.