us households balance sheets remained strong in the first half of this year as the debtto gdp ratio edged down a new study from the federal reserve said friday household debt was at modest levels relative to gdp and concentrated among primerated borrowers the fed said in its latest report on the country’s financial stability economists watch the health of us households closely as consumer spending makes up roughly 70 of gross domestic product the fed said that going forward inflation and rising borrowing costs may pose risks to the ability of households to service their debt especially for those holding adjustablerate products an economic downturn or a correction in real estate prices would also put pressure on household balance sheets in the first six months of the year the ratio of household debt to gdp inched down and stood at levels similar to those that existed before the buildup preceding the 20072009 financial crisis the fed said balance sheets were strong despite a sharp decline in equity prices due to elevated levels of liquid assets and large home equity cushions many households started to draw down the buffers of savings that had accumulated during the pandemic and some households remain financially stressed the fed said borrowing for nearprime and subprime borrowers dropped over the period one note of caution is that there was an increase in borrowers rated prime after the government sent out pandemicrelated payments the household debt service ratio increased somewhat in the first half of 2022 the fed said but the ratio remained at moderate levels after hitting a historic low in the first quarter of 2021 only a small share of household debt has a floating rate mortgage debt accounts for about twothirds of total household debt in recent year new mortgage extensions have skewed heavily toward prime borrowers with originations of subprime loans adjusted for inflation running at 25 of the peak level of 2006 only 19 of mortgage borrowers had negative equity in the second quarter of 2022 the remaining onethird of household debt was consumer credit which is mainly student loans auto loans and credit card debt inflationadjusted consumer credit edged down as the increase in credit card debt was offset by declines in student loan debt and auto debt the fed said while auto loans in delinquent status have increased significantly in the past year the increases were to modest levels seen over most of the previous decade there has been doubledigit nominal credit card debt growth but revolving balances remain about 10 below prepandemic levels with the rise in balances delinquency rates started to increase from a year earlier among subprime borrowers