A week ago I featured the chart above showing that the household debt service ratio (red line) was 11.75% in the last quarter of 2010, which is the lowest ratio since the first quarter of 1998, and the household financial obligations ratio at 16.64% in Q4 2010 was the lowest since the first quarter of 1995.
Dennis Cauchon has an article in today's USA Today that offers some explanations for the trend in the graph above:
Dennis Cauchon has an article in today's USA Today that offers some explanations for the trend in the graph above:
"Americans are reducing mortgage payments at a record clip, directing cash that once went for debt into consumer spending and savings. Low interest rates, defaults and refinancings have shaved more than $100 billion off the nation's annual mortgage bill — an amount comparable to all unemployment benefits for one year or this year's Social Security payroll tax cut.
Homeowners have trimmed interest payments alone by 11% — or $67 billion a year — from the peak in 2008, according to the Bureau of Economic Analysis (BEA). The savings come equally from grabbing lower interest rates and reducing what's owed by paying down principal or defaulting on loans. The nation has slashed total mortgage debt from nearly $11 trillion at the mid-2008 peak to $10.3 trillion in the first three months of 2011, the BEA reports."
MP: Many of the comments on the original CD post mentioned some of the same reasons for the significant deleveraging of American households over the last several years or more.
Post Title
→The Deleveraging of American Households
Post URL
→https://manufacturing-holdings.blogspot.com/2011/05/deleveraging-of-american-households.html
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