02/17/2015 12:01 EST | Updated 04/19/2015 05:59 EDT

Towering student debt load likely shutting young Americans out of housing market, NY Fed says

WASHINGTON - Younger Americans are struggling to keep up with steadily-rising student debt loads, a burden that is limiting their ability to buy homes.

The Federal Reserve Bank of New York said Tuesday that the percentage of student loans 90 days or more overdue rose to 11.3 per cent in the final three months of last year, up from 11.1 per cent in the previous quarter. That's the highest in a year. Total student borrowing now stands at $1.16 trillion, the most on record and 7.1 per cent higher than 12 months earlier.

Previous research by the New York Fed has found that younger Americans with student loans are less likely to take out mortgages than those without student debt. That's a reversal from the pre-recession pattern.

Before the 2008-09 downturn, 30 year-olds with student debt were more likely to have mortgages because of their higher levels of education and higher potential incomes, the New York Fed says. Now they are slightly less likely to have mortgages than 30-year olds without student debt.

"Student loan delinquencies and repayment problems appear to be reducing borrowers' ability to form their own households," said Donghoon Lee, a research officer at the bank.

Americans are also struggling with auto loans, the report showed, but are doing a better job keeping up with all their other debts.

Just 7.3 per cent of credit card balances are 90 days or more overdue, down from 7.5 per cent in the previous quarter. Credit card delinquencies have fallen sharply since the Great Recession after reaching a peak of nearly 14 per cent 4 1/2 years ago. The current level is near the lowest since the New York Fed began tracking the data in 1999.

Delinquency rates for mortgages and home equity lines of credit also fell in last year's fourth quarter from the previous three months. About 3.1 per cent of mortgages are delinquent, down from nearly 9 per cent in early 2010. That's still higher than the 1 per cent to 1.5 per cent that was typical before the recession.

Auto loans are another source of concern for the New York Fed. About 3.5 per cent are 90 days or more overdue, up from 3.1 per cent three months earlier. That's the first significant increase after four years of steady declines.

The data point to long-term changes in how Americans are using credit. After a debt-fueled housing and consumption binge in the last decade that contributed to the 2008 financial crisis, Americans are more cautious about credit card and housing-related debt.

Americans had $700 billion in credit card debt at the end of last year, up just $17 billion, or 2.5 per cent, from 12 months earlier. That's down from $824 billion when the recession ended in mid-2009. Mortgage debt, by far the largest category of household debt, rose 1.5 per cent in the past year to $8.17 trillion.

Still, overall debt levels rose in last year's fourth quarter, which is generally a sign that Americans are more confident and willing to borrow more. Total household debt rose $117 billion from October through December to $11.8 trillion, the report said.