Although household debt is up close to the 2008 peak, other factors come together to show that it may not be as risky to households as it was before.
Some of the main differences today include improved credit conditions, as banks tightened their standards on some consumer loans, a recent report from Capital Economics states.
Delinquency rates for most categories of household debt are low and stable, also giving little cause for concern, the report continues.
Overall, the credit default rate increased one basis point monthly to 0.83% in July, however it is still down from last year’s 0.92%, according to the Consumer Credit Default Indices released by S&P Dow Jones Indices and Experian. The first mortgage default rate also increased one basis point from last month to 0.66%, and now but remains down from last year’s 0.8%.
“The latest data show that household debt is now close to its 2008 peak in dollar terms,” Capital Economics Chief Economist Paul Ashworth said.
“However, the gains in income over the past eight years and the decline in interest rates mean that households are now in a far stronger position to pay down that debt that they were prior to the financial crisis,” Ashworth said.
