How Did Consumer Borrowing Change After the Great Recession?

Each of the "regional economists" issued by the Federal Reserve Bank of St. Louis published the "Ask the Economist" section. There, one bank economist answered the question. The following answers were provided by economist Don Schlagenhauf.

After the increase in household debt in the early 21st century, consumers have steadily reduced their overall debt level (ie leverage release) since the end of the Great Depression in June 2009.

The ratio of household debt to personal income peaked in the mid 2000s, approached two, but it fell to about 0.9 in the second quarter of 2017.

However, even if you display summary data, you can see some of them. Carlos Garriga, Bryan Noeth, and I will understand the increase in liabilities and the subsequent de-leveraging by understanding mortgage debt, credit card debt, car loan held by different age groups between 1999 and 2013 And studied the patterns of student loans.

Clearly, the biggest change in the borrowing in this period is the debt of the mortgage. In the early 21st century, the average mortgage debt of all age groups increased, especially for young families. In 1999, the home owner who owned the largest mortgage debt (about $ 60,000 in 2013) was about 45 years old. In 2008, people around the age of 42 experienced mortgage maximum debt (about $ 117,000). Despite the massive de-leveraging (especially young people under 60) after the recession, the average mortgage debt in 2013 remained higher than in 1999.

Credit card liabilities also increased mainly for people over the age of 30 and began to decline since 2008. Unlike other types of debt, the average credit card debt in 2013 was lower than most age groups in 1999.

The automotive debt also increased between 1999 and 2008, but the automobile debt at the time of recession recovered in 2013.

On the other hand, the debt of students has increased in all ages from 2005 to 2013. For those over the age of 50, this increase may be due to parents and grandparents accepting loans or signing relatives.

Debt is not necessarily a bad thing, since it allows an individual to make up for a mismatch between revenue and consumption expenditure early in life; consumers need only to be cautious about the amount of debt they owe is. However, by studying the debt model, I hope to better understand the turning points between controllable debt and debt levels and expose consumers to risk.

1 Carriga, Carlos, North, Brian, Schlagenhauf, Don E "Family debt and economic recession". Federal Reserve Bank St. Louis Review, 2nd Quarter of 2017, Volume 2. 99, No. 2, pp. 183-205

Posted in Finance | Tagged Don schlagenhauf, Great Recession, Consumer Debt, Home Finance Stabilization Center

The federal government regulates how families can borrow money to buy a house. Mortgages are complex legal and financial contracts that most borrowers do not fully understand. Since the Depression, federal agencies such as the Federal Reserve and Consumer Finance Protection Bureau have introduced new rules to prevent banks from selling mortgages that borrowers can not repay. This regulation also requires the loan to provide clear and accurate information on mortgage terms to the borrower. The new regulation protects the overall health of consumers and the financial system, but it may increase borrowing costs and make it more difficult to buy a home.

Despite the economic downturn, growth in Canadian household credit has hardly changed, but the government debt is rapidly increasing. In the fourth quarter since the economic recession began, borrowing at all levels by the government increased by 21%, but there has been little change for the past 10 years (Figure 3.9). This increase reflects a steady increase in current expenditure, as well as an increase in transfer payments and capital expenditure, but tax revenues sharply declined as corporate and individual income declined. During the economic downturn, corporate lending also changed dramatically. After rose by about 8% in 2007, the lending of nonfinancial private enterprises increased by 11% in the fourth quarter of 2008 compared to the same period last year, indicating that the Canadian credit market continues to play a role. The most serious crisis elsewhere. As the economic recession is relaxed, corporate financing has also slowed down from 1992 to 1993 and 2002 as well.