Wednesday, 20 of June of 2018

Economics. Explained.  

Consumer Debt Service Ratio

April 3, 2018

Consumers debt service payments relative to their income were essentially unchanged in the third quarter at 10.3%.  This debt service ratio peaked at 13.2% of income in the fourth quarter of 2007, and it fell rapidly for the next give years and eventually dipped to the 10.0% mark which is the lowest on record for a series that stretches back to 1980 — 38 years ago!  It has just begun to inch its way upwards again in the past couple of quarter but, still, a 10.3% ratio is very low by any historical standard.

The household debt service ratio is an estimate of the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt.

The financial obligations ratio is a somewhat broader concept and adds automobile lease payments, rental payments on tenant-occupied property, homeowners’ insurance, and property tax payments to the debt service ratio.  The picture looks much the same although the recent upturn is somewhat more pronounced.  It briefly fell to  15.0% in Q4 2012  and is now at 15.9% which is still well below its historical average of 16.6%.

Any way one slices it consumer debt is  at a very comfortable level and there is plenty of room for consumers to take on additional debt if they so choose.

Stephen Slifer


Charleston, SC

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