The relief of the pandemic has helped the Americans. But there are signs of stress

Although household debt reached a record $ 17 trillion in the second quarter of 2021, many American households have experienced less financial stress this year thanks to the government’s Covid-19 policy.

That’s according to the Federal Financial Stability Board, which released its 2021 annual report on Friday. The council was created by legislation after the financial crisis of 2008-2009.

The report found that while many households were supported by more generous unemployment insurance payments and incentive checks, some people still struggle financially, especially if they work in the sectors most affected by the pandemic.

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Still, there are signs that the economic recovery has helped bolster American financial security.

While household debt is high, the ratio of this debt to disposable personal income is “well below its peak in 2007 and slightly below its pre-pandemic level,” the report said.

Moreover, the household debt ratio, which measures total household debt payments relative to disposable income, is quite low due to rising incomes and low interest rates.

The personal savings rate rose sharply in April 2020 and this March following direct payments from the government, although it returned to its long-term average in September.

However, Americans can feel wealthier thanks to the increase in home equity in their homes, as well as gains in the stock market.

While household net worth fell 5.6% in the first quarter of 2020, it has since risen to record levels.

However, Americans continue to struggle with debt, as consumer loans account for about 25% of total household debt. This includes credit cards, car loans, installment loans, and student loans.

While credit card debt declined amid Covid-19, car and student loan balances increased.

Loans to subprime borrowers – those with less than ideal credit – declined in 2020 and 2021, likely in part due to tough lending standards for this population. However, fewer borrowers can now be classified as subprime due to Covid-19 assistance programs, such as the CARES law requirement that abstinence loans must be reported as outstanding to credit reporting companies, which may have raised some credit ratings.

The policies implemented during the pandemic also helped to reduce the rate of credit card and student loan delinquencies.

However, the share of mortgage loans with some form of non-payment is higher than before the pandemic. Mortgage delinquency rates could rise as the mortgage waiver program expires later this year. In addition, the number of evictions could skyrocket as the federal and state moratorium on evictions expires, the report said.

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