Report: Americans Paring Down Household Debt

By Newsroom America Staff at 9 Aug 2012

(Newsroom America) -- Five years after the housing bubble burst and the nation's financial institutions nearly collapsed, Americans are eliminating more of their household debt, figures show.

The latest sign of that came this week in a report that showed an increasing amount of homeowners paying their mortgages on time, NBC News reported.

This year alone, the number of mortgage holders behind two months or more on their payments has fallen 9 percent, according to TransUnion, a consumer credit rating agency.

The firm said 5.49 percent of mortgage holders were badly behind in the latest quarter, the lowest figure since the first quarter of 2009.

The Federal Reserve, meanwhile, said Americans are now spending an average of 11 percent of their disposable income to pay down debt, down from a peak of 14 percent in 2007, just before the Great Recession began.

That's the lowest debt service ratio since 1994, reports said.

"We are probably witnessing a shift in consumers’ attitudes towards debt," Paul Edelstein, an economist at IHS Global Insight, told NBC News.

As Americans shift to paying down more debt, that serves as a mixed blessing for the economy. Rampant borrowing drove economic growth in the early 2000s but it became unsustainable.

Now, more Americans are building a savings cushion that will better allow them to weather tougher economic times, such as losing a job.

That, however, means Americans are spending less. Economic growth slowed to a paltry 1.5 percent in the latest quarter, down from 2.4 percent from the first quarter of the year.

Consumer spending drives 70 percent of the U.S. economy.

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