Mortgage rates, auto loan, and credit card debt are identified in a new Alaska Department of Labor report as significant players in household debt statewide, which is now being at its highest point since at least 2003.
Still the amount of debt and whether it is rising doesn’t say anything about how effectively people are managing their debts, wrote state labor economist Rob Kreiger in the August issue of Alaska Economic Trends. Alaska households have $68,780 in debt per capita in 2023, the ninth highest in the country. Per capita debt is calculated by dividing total debt by the number of people in the state with a credit report.
Alaska households appear to be managing debt effectively, as evidenced by low delinquency rates in mortgage and auto loan payments. Some signs point toward more difficulty payment off credit cards than in the past, with credit card delinquency reaching its highest point since at least 2003.
Of the four main categories of household debt in Alaska, mortgage payments are the largest by far, representing nearly 74% of household debt. Auto loans are 8.5%, credit cards 7.2%, and student debt 6.2%.
Kreiger notes that whether debt levels are rising, falling, or inflation-adjusted doesn’t shed much light on how households are managing their debts.
“When households fall behind on payments, it generally signals financial strain, so delinquency rates are one way to assess debt management,” he said. “If debt levels are high and delinquency rates are low, households can probably keep up with payments despite having more debt overall. When delinquency rates rise significantly above historical levels, it’s often a bad sign regardless of debt levels.”
Mortgage debt delinquency overall stayed very low in Alaska in 2023, at 0.6%, but from record lows of two prior years of 0.2%. While Alaska was largely shielded from the housing bubble that burst in the Lower 48, some households here were overextended and began to slip on mortgage payments, Krieger said. Alaska’s delinquency rates hit their highest level in 2009 at 3%. For comparison mortgages also hit their highest national delinquency in 2009 but at 8.7%.
Auto debt delinquency, which tends to be higher than for mortgages, but lower than for credit cards and student loans, followed a different path than mortgage delinquency after the Great Recession. Auto delinquency dipped slightly and then resumed, hitting a peak of 2.9% in 2020. Auto delinquency rates have pulled back some in the past few years, but remain relatively high. Krieger said one reason may be that mortgage lending practices became more restrictive for buyers with lower credit scores, but auto loans were still available for those borrowers.
Credit card delinquency in 2023 jumped to 8.1%, the highest level since at least 2003. Krieger said that may be an indication of how households prioritize their debt with higher consequences, such as mortgage and car payments, over debts easier to put aside.
Student loan delinquency dropped significantly as the federal government unveiled various measures to provide payment relief during the COVID-19 pandemic. Delinquency in Alaska fell from a peak of 10.9% in 2019 to 5.3% in 2020, ultimately falling below 1% in 2023, Krieger’s report said.
