WASHINGTON (Reuters) - A measure of the burden of household debt dropped in the second quarter to levels last seen more than 18 years ago, a welcome sign for struggling Americans.
The household debt service ratio - an estimate of the share of debt payments to disposable personal income - fell to 10.69 percent from 10.81 percent in the first quarter, the Federal Reserve said on Thursday.
It was the lowest level for the ratio since the fourth quarter of 1993.
“It shows that families are becoming more careful with the amount of debt they are taking on and that’s part of the deleveraging process,” said Adolfo Laurenti, deputy chief economist at Mesirow Financial in Chicago.
A huge debt load, fanned in part by the housing market bubble, helped to trigger the worst U.S. financial crisis since the Great Depression and efforts to pay down those debts have been a restraint on consumer spending.
The Fed said last week that household debt rose in the second quarter for the first time in more than a year. Declining interest rates, however, helped ease the burden of the debts households still hold.
The U.S. central bank has held benchmark overnight interest rates near zero since December 2008 and has bought around $2.3 trillion in bonds to push other borrowing costs lower.
A broader measure of financial obligations that includes automobile lease payments and the cost of renting a home also declined, reaching 15.78 percent, a low not seen since the second quarter of 1984.
Mortgage debt payments dropped to 9.02 percent of disposal income in the second quarter, the lowest since the third quarter of 2001, while the relative cost of rent was little changed.
Reporting by Lucia Mutikani; Editing by James Dalgleish