WASHINGTON, Dec 27 (Reuters) - A measure of the burden of U.S. household debt tumbled in the third quarter to its lowest level in 29 years, which should help free up more 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 10.61 percent from 10.72 percent in the second quarter, the Federal Reserve said on Thursday.
It was the lowest level since the fourth quarter of 1983.
A huge debt load, fanned in part by the housing market bubble, helped 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 Federal Reserve has held benchmark overnight interest rates near zero since December 2008 and has bought around $2.4 trillion in bonds to push other borrowing costs lower, helping ease the pressure on consumers.
“You have a lot of people refinancing their mortgages at lower rates,” said Gennadiy Goldberg, an economist at TD Securities in New York. “Some homeowners have more money in their pockets to spend, which should be positive for the economic recovery going forward.”
The debt service ratio takes into account outstanding mortgage and consumer debt.
A broader measure of financial obligations that includes automobile lease payments and the cost of renting a home also fell in the third quarter, dropping to 15.74 -- the lowest level since the first quarter of 1984.
Mortgage debt payments dropped to 8.90 percent of disposal income in the third quarter, the lowest in 11 years, while the relative cost of rent edged up marginally.