More U.S. Consumers Climb Out of Debt – WSJ.com
American workers haven’t seen their incomes grow much since the recession ended more than three years ago, but they do have something to show for the recovery: Household debt payments are at their lowest level in decades, which is helping paychecks stretch further.
Lance Rosenfield / Prime for The Wall Street Journal
Lance and Julene Lambert of Austin, Texas, have paid down their debt.
U.S. households spent 10.6% of their after-tax income on debt payments in the third quarter of the year, the lowest level since 1983, according to recently released Federal Reserve data. Add in other required payments that aren’t classified as debt—such as rent and auto leases—and the figure rises to 15.7%, also near a 30-year low.
Debt payments are being pushed down by a variety of factors. After borrowing heavily during the housing boom, many families have devoted much of the past five years to working off debts and rebuilding savings. Not all such deleveraging has been voluntary. Foreclosures and bankruptcies have played a major role in reducing household debt, while tighter lending standards have made fresh borrowing difficult for many people.
But for those who do qualify for loans, record-low interest rates have made it far cheaper to buy a car or house and have allowed millions of families to refinance their mortgages, often reducing payments by hundreds of dollars a month.
Home prices are finally rising again in parts of the country, which could open the door for thousands more to refinance in the months ahead.