Overview of US mortgage markets - 2005

1.1 Overview of the US mortgage market Owner-occupied housing and the mortgages used to finance it are currently the single largest asset and liability on the household balance sheet. As shown in Graph 1, residential mortgage debt has grown so that households now owe just over $8 trillion. Consumer credit, which includes personal loans, auto loans and credit card balances, now stands at just over $2 trillion. As a ratio of after-tax personal income (Graph 2), mortgage debt outstanding has roughly doubled since 1980, rising from about 45% of disposable personal income (DPI) to about 90%. The rise in mortgage debt has been driven by increasing home ownership (as rental payments are replaced by mortgage payments), declining interest rates, changes in tax laws, and rising home values. An interesting comparison is the ratio of mortgage debt to its collateral; that is, the aggregate loan-to-value (LTV) ratio for owneroccupied housing. As shown in Graph 3, this has increased much less sharply than the other debt measures and, indeed, has not increased much since the mid-1990s.