The Federal Reserve’s quarterly consumer credit report released on Tuesday revealed that consumer debt fell by $74 billion to $11.31 trillion in the third quarter, a 0.7 percent decline.
Mortgage debt also fell by $120 billion to $8.03 trillion, the lowest level since 2006, and while the number of mortgage originations increased, home equity credit decreased by $16 billion, Businessweek reports.
“Consumers are seeing their balance sheets recovering are getting more confident,” Yelena Shulyatyeva, a U.S. economist at New York-based BNP Paribas, said, according to Businessweek. “Deleveraging is still a headwind because people want to lower their debt, instead of putting it into consumption.”
A recovering housing market is bolstering consumer spending. Home prices across the country rose three percent at the end of the year in September, and the Conference Board’s index of consumer sentiment rose to a four-year high this month.
Since the top of the third quarter of 2008, American consumers have reduced their debt by $1.37 trillion, Businessweek reports.
Additionally, auto debt increased by $18 billion in the third quarter, credit card balances increased by $2 billion and student loans rose by more than $40 billion.
“The increase in mortgage originations, auto loans and credit-card balances suggests that consumers are slowly gaining confidence in their financial position,” Donghoon Lee, a senior economist for the New York Federal Reserve, said, according to Businessweek. “As consumers feel more comfortable, they may start to make purchases that were previously delayed.”