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32. 1997 Economic Census

797. Household Debt-Service Payments as a Percentage of Disposable Personal Income

[In percent. As of end of year. Seasonally adjusted. The household debt-service 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]

Year Total Consumer Mortgage
1980 12.41 7.99 4.42
1981 12.34 7.62 4.72
1982 12.33 7.47 4.85
1983 12.33 7.46 4.88
1984 12.83 7.80 5.03
1985 13.74 8.29 5.44
1986 14.18 8.50 5.69
1987 13.71 7.92 5.79
1988 13.34 7.58 5.77
1989 13.51 7.57 5.94
1990 13.24 7.11 6.14
1991 12.56 6.51 6.05
1992 11.70 6.03 5.67
1993 11.59 6.13 5.46
1994 12.01 6.52 5.49
1995 12.70 7.05 5.65
1996 13.09 7.44 5.65
1997 13.17 7.47 5.70
1998 13.29 7.57 5.72
1999 13.51 7.58 5.93

Source: Board of Governors of the Federal Reserve System, "Household Debt Service Burden;" published: 24 March 2000; .

The household debt-service burden is the ratio of household debt payments to disposable income.

The limitations of current sources of data make the calculation of the ratio especially difficult. The ideal data set for such a calculation would have the required payments on every loan held by every household in the United States. Such a data set is not available, and thus the calculated series is only a rough approximation of the current debt-service burden faced by households. Nonetheless, this rough approximation may be useful if, by using the same method and data series over time, it generates a time series that captures the important changes in household debt service payments. The series will be revised as better data or improved methods of estimation become available.

To create the measure of burden, payments are calculated separately for revolving debt and for each type of closed-end debt, and the sum of these payments is divided by disposable personal income as reported in the national income and product accounts. For revolving debt, the assumed required minimum payment is 2-1/2 percent of the balance per month. This estimate is based on the January 1999 Senior Loan Officer Opinion Survey, in which most banks indicated that required monthly minimum payments on credit cards ranged between 2 percent and 3 percent and had not changed substantially over the previous decade.

Payments on closed-end loans, which are calculated for each major category of closed-end loan, are derived from the loan amount outstanding, the average interest rate, and the remaining maturity on the stock of outstanding debt.

Estimates of the amount of mortgage debt are taken from the Federal Reserve Board's flow of funds accounts, and estimates of outstanding consumer debt are taken from the Federal Reserve's G.19 statistical release. For consumer debt, a more detailed breakdown by type of closed-end loan is obtained using internal Federal Reserve estimates and data from the installment credit publications of the American Bankers Association.

Interest rates on closed-end consumer loans are obtained from the Federal Reserve's G.19 and G.20 statistical releases, with the exception of student loan rates, which are obtained from the Student Loan Marketing Association (Sallie Mae). An estimate of the interest rate on the stock of outstanding debt is obtained by weighting the recent history of interest rates using information on the age of outstanding loans in the Federal Reserve Board's Survey of Consumer Finances. The interest rate on the stock of outstanding mortgage debt is an estimate provided by the U.S. Department of Commerce, Bureau of Economic Analysis.

Maturity series for consumer debt are taken from the G.19 release and from the American Bankers Association's installment credit publications. Maturity series for mortgage debt are obtained from Credit Suisse First Boston.

Quarterly values for the total debt-service burden as well as values for the consumer debt and mortgage debt-service burden are available from 1980 forward.

These tables are based on figures supplied by the United States Census Bureau, U.S. Department of Commerce and are subject to revision by the Census Bureau.

Copyright © 2006 Photius Coutsoukis and Information Technology Associates, all rights reserved.