updated 8/7/2007 9:14:06 PM ET 2007-08-08T01:14:06

Consumers boosted their borrowing more than expected in June, reflecting another hefty jump in credit card debt.

Major Market Indices

The Federal Reserve reported Tuesday that consumer credit rose at an annual rate of 6.5 percent in June. It marked the second straight sizable gain. Consumer credit rose by an even larger 7.9 percent in May.

The increase was led by an 8.4 percent rate of increase for revolving credit, the category that includes credit card debt. The category that includes auto loans rose at a 5.3 percent rate, the same as in May.

Total consumer credit rose by $13.2 billion in June to a record $2.459 trillion. The increase was double what economists had been expecting.

Consumer credit as measured by the Fed does not include mortgage debt. Analysts said the big rise in consumer credit reflects the slumping housing market and growing troubles in mortgage markets.

When home prices were rising sharply in value, consumers were taking out home equity loans and using other types of mortgage financing instead of relying so much on credit cards.

However, with rising defaults in the subprime mortgage market, lenders have tightened standards for mortgage loans, forcing consumers to move back to credit card borrowing.

“Homeowners are unable to borrow against their homes so they are turning back to their credit cards,” said Mark Zandi, chief economist at Moody’s Economy.com.

Zandi predicted this trend would continue for the next year or so until the housing market stabilizes and home prices start rising again.

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Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 4.94%
$30K home equity loan FICO 5.19%
$75K home equity loan FICO 4.58%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.40%
13.40%
Cash Back Cards 17.92%
17.91%
Rewards Cards 17.12%
17.11%
Source: Bankrate.com