Americans are paying nearly as much interest on credit cards and other debt as they are on their mortgages
While homeowners could lock in a 3% mortgage for 30 years not long ago, other kinds of consumer debt have grown more expensive.
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- Americans are paying almost as much interest on credit cards and other debt as they are on mortgages.
- Nearly equal debt service costs haven't been seen in any of the data stretching back to the 70s.
- Homeowners have locked in low rates, but other debt has become more costly as interest rates rise.
New data reveals that Americans are spending nearly as much on interest payments for credit cards and other kinds of consumer debt as they are on mortgage interest.
According to the US Bureau of Economic Analysis, non-mortgage interest payments soared to a record $573.4 billion annually in January, narrowly trailing the $578.3 billion spent on mortgage interest in the fourth quarter of last year. Source: U.S. Bureau of Economic Analysis
The almost equal amount US borrowers are shelling amount to service mortgage and non-mortgage debt is a phenomenon that hasn't been reflected in any of the data going as far back as the 1970s.
The shift has taken place as Americans secured bargain home loans in the 15 years following the 2008 crisis, particularly during the pandemic when interest rates fell to historic lows and mortgages could be locked in at 3% for 30 years.
Yet other types of consumer credit, the growth of which has outpaced the growth of mortgage debt since the 2008 recession, has become much more expensive since 2022.
Fitch Ratings notes that the effective rate on US mortgage debt was 3.7% in the third quarter of last year. Meanwhile, interest on credit cards was 21.19% during the same period, raising concerns that Americans could soon run into trouble staying current on all of their debt, especially as millions of borrowers resumed paying student loans in the fourth quarter of last year.
Other debt costs may be rising, but mortgage debt is still most Americans' largest financial obligation.
The average American debt load hit $104,215 in the fourth quarter of 2023, fueled by $12.25 trillion in mortgage debt. That amount far surpasses other types, including credit card debt, which stood at $1.13 trillion at the end of last year.
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