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Household Debt Service and Financial Obligations Ratios
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About the Release

The household Debt Service Ratio (DSR) is the ratio of total required household debt payments to total disposable income.

The DSR is divided into two parts. The Mortgage DSR is total quarterly required mortgage payments divided by total quarterly disposable personal income. The Consumer DSR is total quarterly scheduled consumer debt payments divided by total quarterly disposable personal income. The Mortgage DSR and the Consumer DSR sum to the DSR.

Quarterly values for the Debt Service Ratio are available from 1980 forward.

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 an approximation of the debt service ratio faced by households. Nonetheless, this approximation is useful to the extent that, by using the same method and data series over time, it generates a time series that captures the important changes in the household debt service burden. The series are revised as better data or improved methods of estimation become available. To create the measure, 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, a ratio that apparently 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 average remaining maturity on the stock of outstanding debt.

Estimates of the amount of mortgage debt are taken from the Federal Reserve Board's Z.1 Financial Accounts of the United States statistical release, and estimates of outstanding consumer debt are taken from the Federal Reserve's G.19 Consumer Credit 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 Federal Reserve's Survey of Consumer Finances (SCF).

Interest rates on closed-end consumer loans are obtained from the Federal Reserve Board's G.19 Consumer Credit and G.20 Finance Companies statistical releases, the SCF, and additional proprietary data sources.

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 SCF. The interest rate on the stock of outstanding mortgage debt is an estimate provided by the Bureau of Economic Analysis.

Maturity series for consumer debt are taken from the SCF. Maturity series for mortgage debt are calculated using data from Lender Processing Services and Mortgage Bankers Association.

The Financial Obligations Ratio is a broader measure than the Debt Service Ratio. It includes rent payments on tenant-occupied property, auto lease payments, homeowners' insurance, and property tax payments. These statistics are obtained from the National Income and Product Accounts.

Statistical releases