– September 2018
The New York Federal Reserve Bank compiles data on how much debt and what type of debt households have. The most recent release of debt data shows that household debt as a percentage of disposable income fell to the lowest levels since 2002. Debt payments include loans on autos, mortgages, education, and credit card balances.
The data shows that households are seeing less debt payments as a percentage of disposable income. Economists view the recent data from different perspectives. Optimistically consumers may be scaling back on debt payments and thus have more free cash to spend on goods, services, or savings. Pessimistically, consumers may be in the beginning stages of cutting back on borrowing, thus reflecting less confidence in their future income and/or overall financial position.
Either way, holding less debt in a rising interest rate environment is good for consumers since they are saving on the higher costs incurred from rising interest rates. The most recent data shows that households spend about 10.21% of their disposable income on debt payments, a slight decrease from levels over the past two years.
Source: New York Federal Reserve Bank
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