US household debt burden hits 29-year low | business | Hindustan Times
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US household debt burden hits 29-year low

business Updated: Dec 28, 2012 22:53 IST
US household debt

A measure of the burden of US household debt tumbled in the third quarter to its lowest level in 29 years, which should help free up money for consumer spending and support the economy.

The household debt service ratio - an estimate of the share of debt payments to disposable personal income -fell to 10.6% from 10.7% in the second quarter, the Federal Reserve said on Thursday. It was the lowest level since the fourth quarter of 1983.

"Consumers have more money in their pockets to spend, which should be positive for the economic recovery going forward," said Gennadiy Goldberg, an economist at TD Securities.

US households built up a massive debt load as the housing bubble expanded and efforts to pay down those debts have been a restraint on spending and the economy's recovery.

The debt service ratio, which takes into account outstanding mortgage and consumer debt, peaked in the third quarter of 2007, shortly before the economy tipped into recession.

The Fed has sought to help consumers dig out by keeping interest rates near record lows. It has held overnight rates near zero since December 2008 and has bought around $2.4 trillion in bonds to further lower borrowing costs.