It will come as a surprise to exactly nobody that the Fed’s latest quarterly Household Debt and Credit report (for Q4 2025) reported total household debt balances increased by $191 billion in the fourth quarter of 2025, a 1% rise from 2025 Q3, to a new all-time high. Balances now stand at $18.8 trillion and have increased by $4.6 trillion since the end of 2019, just before the pandemic recession.
This is how various debt balances changed through the quarter:
- Mortgage balances shown on consumer credit reports grew by $98 billion during the fourth quarter of 2025 and totaled $13.17 trillion at the end of December.
- Balances on home equity lines of credit (HELOC) rose by $12 billion, the 15th consecutive quarterly increase.There is now $433 billion in outstanding HELOC balances, $116 billion above the low reached in 2022Q1. In total, non-housing balances increased by $81 billion, a 1.6% increase from 2025Q3.
- Credit card balances rose by $44 billion during the fourth quarter and now total $1.28 trillion outstanding, up 5.5% since last year.
- Student loan balances increased by $11 billion and now stand at $1.66 trillion.
- Auto loan balances edged up by $12 billion to $1.66 trillion.
- Other balances, which include retail cards and consumer finance loans, rose by $14 billion and now total $564 billion.
New debt originations were also solid in the quarter:
- The volume of mortgage originations, which includes both refinance and purchase originations, increased with $524 billion newly originated in 2025 Q4, an uptick from the $512 billion seen in the previous quarter. It was the highest since 2022 when rates were far lower.
- There were $181 billion in new auto loans and leases appearing on credit reports during the fourth quarter, a small dip from the $184 billion observed in 2025 Q3.
- Aggregate limits on credit cards continued to rise, with a $95 billion (1.6%) uptick in the fourth quarter.
- Home equity lines of credit (HELOC) limits rose by $25 billion (2.5%), continuing an expansion in HELOC limits that began in 2022.
- Credit quality of newly originated mortgages held steady, while auto loans loosened slightly. The median credit score for new mortgage originations was 775 in 2025Q4, unchanged from 2025 Q3 while the tenth percentile declined from 660 to 650. For auto loans, the median credit score edged down, from 724 to 716.
Taking a closer look at some of the negative changes below the surface, delinquency rates on loans ranging from mortgages to credit cards rose to 4.8% of all outstanding US household debt in the fourth quarter, up 0.3% sine Q3 2025 and the highest level since 2017, driven by higher defaults among low-income and young borrowers.
As Bloomberg notes, while the overall share of loans in some stage of default is near pre-pandemic averages, the rise in delinquencies among the lowest earners adds to evidence of an increasingly K-shaped economy, and nowhere was it more obvious than in the case of student loans – where with the Biden repayment moratorium has been over for the past year – we have seen a tsunami of both early delinquencies, with 16.3% of student-loan debt became delinquent in Q4 the biggest increase on record in data going back to 2004…
… and serious delinquencies (effectively defaults)…
… led by 50+ year-old “students” (almost certainly of the liberal major, blue-haired anti-ICE, variety).
The rise in defaults was also driven by delinquencies in mortgage payments, and New York Fed researchers found that they were particularly high in lower income zip codes.
“As household debt levels grow modestly, mortgage delinquencies continue to increase,” said Wilbert van der Klaauw, an economic research advisor at the New York Fed, said in a press release accompanying the figures. “Delinquency rates for mortgages are near historically normal levels, but the deterioration is concentrated in lower-income areas and in areas with declining home prices.”
The increased struggle in low-income and young borrowers’ ability to pay their loans is consistent with elevated unemployment rates among some parts of the population, the NY Fed researchers added. The jobless rate for workers 16 to 24 years old stood at 10.4% in December, near the highest levels since the depths of the pandemic in 2021, and largely the result of AI disruption.
But if the Fed is concerned about the soaring debt delinquencies now, just wait a few years until a third of all jobs are replaced by hallucinating chat bots, and the overall unemployment rate is 15%, something we discussed earlier. At that point the question will not be whether Kevin Warsh will shrink the balance sheet – he never will – but whether the coming Universal Basic Income money printing will be measured in the trillions or quadrillions.
But wait, there’s more: because chatbot algos do not need an office – and the workers they displace no longer need an office – the spiked in post-covid office defaults is back, and according to commercial real estate specialist Trepp, the CMBS delinquency rate increased again in
January 2026, climbing 17 basis points to a record 7.47%.
The increase was driven by a net increase in delinquent loans of almost $1.6 billion, primarily driven by the office sector. For the second straight month, three of the five major property types saw increases to their delinquency rates, while two pulled back, although the mix was different in January.
The largest rate increase was in office, which rose 103 basis points to an all-time high of 12.34%. The previous high was 11.76% back in October last year. The second largest rate increase was multifamily’s, which seesawed back up by 30 basis points in January to 6.94%, following a decrease of similar magnitude of 34 basis points the month prior.
January’s balance of newly delinquent loans totaled just under $5.4 billion, while over $2.6 billion of delinquent loans cured over the same period, and $1.1 billion of delinquent loans paid off, resulting in a net delinquency increase of about $1.6 billion.
The office sector was the largest net contributor to the increase in the delinquency rate, while a large lodging loan that cured in January helped to offset some of the increase in the headline delinquency rate.
It gets worse: if we were to include loans that are beyond their maturity date but current on interest (delinquency status of performing matured balloon), the delinquency rate would be 9.14%, up 39 basis points from December. That is also 167 basis points higher than the headline rate of 7.47%, highlighting ongoing maturity-related stress.
Bottom line: at some point the AI revolution may well lead to a productivity revolution, but to get there the US will first go through a mass layoff wave, resulting in tens if not hundreds of millions of layoffs (a 15% unemployment rate to go with the 15% growth rate), coupled with a historic debt crisis and a collapse in virtually every commercial real estate sector while Blackstone buys up all the residential real estate it has had its eyes on for the past decade.
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