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Understanding U.S. Consumer Debt Trends in 2023
By O1ne Mortgage
Overall Debt Levels Slow but Still Increase
As of the third quarter (Q3) of 2023, U.S. consumers owed a staggering $17.1 trillion in total debt, according to Experian data. This represents a 4.4% increase from 2022’s $16.38 trillion total. While this growth is slower than the 7% increase from 2021 to 2022, it still indicates a significant rise in consumer debt.
Southern States See Higher Growth in Average Consumer Debt Balance
In 2023, Southern states such as Alabama, Florida, North Carolina, Oklahoma, South Carolina, and Texas saw average total debt balances increase by 4% or more, compared to the national average of 2.3% growth. This trend may be attributed to lower average FICO® Scores in these states, which can result in higher financing costs for consumers.
Average Overall Debt Increased Most for Those With Poor Credit
Consumers with poor credit experienced the most significant increase in debt, with balances rising by more than 20% from 2022. High borrowing costs and additional fees due to missed payments have contributed to this substantial increase.
Older Generations Shed Some Debt While Younger Consumers Carry More
In 2023, older generations began to reduce their overall debt, while millennials and Generation Z saw their debt balances grow by 8% and 15.4%, respectively. Generation X registered a modest increase of 1.9%.
Mortgage Debt Increases Alongside Higher Mortgage Rates
Despite a subdued housing market, mortgage debt grew at a modest 3.2%, reaching $11.6 trillion as of Q3 2023. High mortgage rates and a limited housing supply have discouraged many potential homebuyers and existing homeowners from entering the market.
Auto Loan Debt Moderates for Most Generations
While auto loan balances increased by 7.1% through Q3 2023, the rate of increase was lower than in previous years. The automotive market has mostly recovered from supply shortages, leading to more stable auto financing costs.
Student Loan Debt Flat in 2023; Now Payments and Debt Cancellations Resume
Federal student loan repayments and interest remained paused throughout 2023, resulting in relatively unchanged student loan balances. However, as repayments resume, the impact on consumer finances will become clearer in 2024.
Gen Xers Carry Significantly Larger Average Credit Card Balances
Generation X consumers, in their mid-40s to mid-50s, have average credit card balances of $9,123, which is 40% greater than the national average. This generation is likely to have multiple monthly payments, including student loans, mortgages, and car payments.
Personal Loan Debt up; Some Borrowers Continue to Pivot to Fixed-Rate Loans
Both unsecured and secured personal loans grew at double-digit rates in 2023, as consumers sought to consolidate high-interest debt. This trend indicates a shift towards more stable, fixed-rate loans.
Consumer Debt in 2024: Credit Card, Auto Loans in Focus
As we enter 2024, rising interest rates on variable-rate credit cards remain a concern. However, solid wage growth and low unemployment rates are expected to help consumers manage their debt burdens.
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