Is Mortgage Debt Considered Consumer Debt?

Mortgage debt is the largest component of consumer debt.
Mortgage debt is the largest component of consumer debt. (Image: monetary street image by Yuriy Poznukhov from

Mortgage debt is one component of household debt, also known as consumer debt. Federal Reserve Bank of New York numbers from the third quarter of 2010 indicate that total household debt is $11.6 trillion. Mortgage debt comprises 74 percent of that total, or $8.6 trillion.

Other Consumer Debt

Consumer debt also includes credit card debt, home equity lines of credit, car loans, student loans and a catch-all "other" category. The other category is 3 percent of the total, student loans 5 percent, and the remaining three categories are each 6 percent.

Tracking Consumer Debt

Changes to consumer debt are one indicator the Federal Reserve uses to measure the health of the economy. When consumers have high debt loads, it means that demand for goods and services might fall because they have less money to spend. This can have an impact on employment and national income. A high debt ratio also means that consumers are at greater risk of bankruptcy.

Economic Theories

American economist Milton Friedman theorized that people have a pretty good idea of how much they will earn over their lifetime, and each year spend a fairly stable amount of that income. In this case, consumer debt might increase during times that income is low and decrease when income is high. This is the known as the "permanent income hypothesis." Another theory, developed by American economist Irving Fisher and English economist Roy Harrod, called the life cycle hypothesis, predicts that certain age groups may borrow when income is low as compared to what they expect to earn over their lifetime.

Alternative Views

Organizations such as the National Foundation for Credit Counseling provide advice to consumers who may be considering bankruptcy. Rather than a life-cycle approach, such organizations use current income as a guide to how much debt to take on. They, like many similar organizations, offer tips on preparing for job loss, alternatives to bankruptcy and tips on the foreclosure process. Living within your means is their mantra.

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