Wednesday, 22 of November of 2017

Economics. Explained.  

Consumer Debt Service Ratio

June 24, 2017

Consumers debt service payments relative to their income were essentially unchanged in the third quarter at 10.0%.  This debt service ratio peaked at 13.2% of income in the fourth quarter of 2007, and it has fallen rapidly ever since then.  The current level of the debt service ratio is essentially the lowest on record for a series that stretches back to 1980 — 37 years ago!

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.

This series has averaged 16.6% over the past 30 years.  At 15.4% currently it is close to its record low level of 14.9% set in the fourth quarter of 2012.

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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