Trends in Debt Burden and Delinquencies

The Federal Reserve Board publishes a quarterly statistical report on consumers' debt burden. Debt burden 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 latest available data show that the total burden of debt payments reached 14.35 percent of disposable (after-tax) income. This is the highest level since the all-time high of 14.38 percent in the fourth quarter of 1986.

The delinquency rates on consumer loans reported by the 100 largest banks suggest that the main negative effect of the increased burden has been on delinquency rates on credit cards. Since 1995, delinquency rates on bank credit cards rose from 3.55 percent of outstandings to 4.62 percent. In contrast, as might be expected, consumers were much more likely to make timely home mortgage payments. Delinquencies on residential mortgages fell from 2.15 percent in 1995 to 2.10 percent in 2000, but moved sharply up to 2.45 percent in the first quarter of 2001.

Source: Federal Reserve, 100 largest banks