What is debt service ratio?
The debt service ratio (DSR) measures the required minimum payments households owe on their debts as a share of disposable personal income. It includes payments on mortgages, credit cards, auto loans, and student loans. The Federal Reserve publishes it quarterly. It was 11.11% in Q2 2026: scheduled debt payments equaled about one in every nine dollars of the nation's after-tax income. It is the input to the ADI's Debt Burden domain.
Updated
Key facts
- The Federal Reserve's Household Debt Service Ratio (FRED BOGZ1FL010000346Q) was 11.11% of disposable personal income in Q2 2026, the same as a year earlier; it averaged 11.07% across 2016-2025.
- The mortgage debt service ratio was 5.83% in Q2 2026 — scheduled mortgage payments, including escrowed taxes and insurance, as a share of everyone's after-tax income, renters included. In Q1 2021, when stimulus payments swelled income, it was 4.76%.
- The Financial Obligations Ratio (FOR), a broader measure that added rent, auto leases, homeowner's insurance, and property taxes, was discontinued; its final data are for Q3 2023.
- The ratio was 15.85% in Q4 2007, just before the financial crisis. The Fed's current method begins in 2005; earlier values come from an older method and are not comparable.
- The ADI's Debt Burden domain uses the debt service ratio as its input — when a larger share of income goes to required debt payments, less is left for saving and other spending.
Related data
- Household Debt Service Ratio →11.1%, Q2 2026
- Mortgage Debt Service Ratio →5.8%, Q2 2026
How Is the Debt Service Ratio Calculated?
The Federal Reserve Board calculates the DSR as the ratio of scheduled required debt payments reported in credit bureau data to disposable personal income from the National Income and Product Accounts:
- Numerator: Scheduled required payments on mortgages and consumer credit (credit card minimums, auto loans, student loans, personal loans), read from credit-bureau records. Mortgage payments include escrowed property taxes and insurance.
- Denominator: Disposable personal income — total personal income minus personal tax payments.
- Result: A percentage representing the share of after-tax income consumed by debt payments before any other expenses.
The Fed publishes three ratios:
- Mortgage DSR: Mortgage debt service payments only (5.83% in Q2 2026)
- Consumer DSR: Non-mortgage consumer debt payments only (5.28%)
- Total DSR: Both combined (11.11%)
DSR vs. Financial Obligations Ratio
The DSR measures only minimum debt payments. The Financial Obligations Ratio (FOR) adds several non-debt fixed obligations:
- Rental payments on tenant-occupied property
- Auto lease payments
- Homeowner's insurance
- Property tax payments
The FOR provides a more complete picture of fixed financial commitments. However, the Fed discontinued the FOR; its final data are for Q3 2023. The ADI uses the DSR because it is still published.
What the Latest Reading Means
A 11.11% debt service ratio in Q2 2026 means that for every $100 of after-tax income across the country, about $11.11 was owed in scheduled debt payments. For context:
- 2013-2019 average: 11.72%
- 2016-2025 average: 11.07%
- Q4 2007, before the financial crisis: 15.85%
The aggregate ratio also masks significant variation. Households with multiple debts (mortgage + auto loan + credit cards + student loans) may have individual DSRs of 25-40%, while households with no debt have 0%. The aggregate 11.11% blends these extremes.
Why Debt Service Ratio Matters for Financial Distress
The DSR is one of the most direct measures of financial fragility because it quantifies the mandatory first claim on household income. The mechanism is straightforward:
- Higher DSR → lower savings capacity: When more income goes to debt payments, less is available to save. The personal savings rate and the DSR move inversely.
- Higher DSR → tighter margin for error: A household spending 25% of income on debt has very little room to absorb a rate increase, a medical bill, or a reduction in hours.
- Higher DSR → delinquency risk: The ratio counts payments owed on both current and delinquent loans, so it measures the burden, not missed payments.
This is why the DSR anchors the ADI's Debt Burden domain rather than its Delinquency domain. A high DSR is not itself a sign of missed payments — it's a sign of less room in household budgets.
State-by-state differences
The Federal Reserve's DSR is a national aggregate, but household debt burdens vary significantly by state based on housing costs, consumer debt levels, and income. State-level proxies can be constructed from Federal Reserve Bank of New York Consumer Credit Panel data.
| State | Key difference |
|---|---|
| California | Higher-than-average mortgage debt service due to home prices, partially offset by fixed-rate mortgages locked in during 2020-2021. Households that purchased or refinanced at 6-7% face significantly higher DSR than those at 2.5-3%. |
| Texas | Above-average total debt per capita driven by auto loans (trucks are more expensive) and credit card balances. No state income tax increases disposable income, which can lower the effective DSR. |
| Mississippi | Among the highest credit card delinquency rates nationally, suggesting DSR for many households exceeds manageable levels. Lower incomes mean even moderate debt levels create high DSR. |
| Utah | Lowest personal bankruptcy filing rate in the nation and below-average delinquency rates, suggesting lower effective DSR despite moderate income levels. Strong savings culture contributes. |
| New York | Highly bifurcated: NYC renters face effective DSR well above the national average when rent is included as a fixed obligation, while upstate homeowners with older, lower-cost mortgages may be below average. |
Questions about debt service ratio
What is a good debt service ratio?
For individual households, financial advisors generally recommend total debt payments below 36% of gross income (the traditional mortgage qualification threshold). The national aggregate DSR of 11.11% of disposable income is at the macro level — individual households vary widely from 0% to 40%+.
How is the debt service ratio different from debt-to-income ratio?
The debt-to-income (DTI) ratio used in mortgage lending compares monthly debt payments to gross income. The Fed's DSR compares debt payments to disposable (after-tax) income. Also, DTI is calculated for individual borrowers at loan origination, while the DSR is a national aggregate published quarterly.
What moves the debt service ratio?
The ratio is scheduled payments divided by after-tax income, so it moves with either. Payments rise with interest rates on new and adjustable debt and with larger balances; income growth pulls the ratio down. The Fed does not publish a cause for any single quarter's change.
What happens when the debt service ratio gets too high?
Before the financial crisis the ratio was 15.85% in Q4 2007, and a wave of defaults followed. American Default has not published a validated threshold at which delinquency accelerates, so no specific trigger level is claimed here. The latest reading was 11.11% in Q2 2026.
Where can I find the debt service ratio data?
American Default reads the Federal Reserve's Financial Accounts measure on FRED, series BOGZ1FL010000346Q, with the mortgage leg from its companion series. FRED's history starts in 1980, but the Fed's current method begins in 2005; earlier values come from an older method that ran lower. American Default tracks it as the core input to the Debt Burden domain at americandefault.org/indicators/debt-service.
Related terms
- Debt-to-Income RatioMonthly debt payments divided by gross monthly income, expressed as a percentage.
- Financial DistressDifficulty meeting financial obligations with available income and resources.
- Living Paycheck to PaycheckHaving little or no money left after monthly expenses, with no savings buffer between paychecks.
- Housing Cost BurdenSpending more than 30% of household income on housing costs, a measure the Census Bureau uses; more than 50% is severely cost burdened.
- Credit Card DebtThe outstanding balance on revolving credit card accounts. U.S. credit card balances were $1.26 trillion in Q2 2026.
- Mortgage ServicerThe company that collects your monthly mortgage payments. This may not be the same company that originally gave you the loan.
- DelinquencyBeing behind on your mortgage payments. Usually counted by how many days late you are — 30, 60, 90, or 120+ days.
- DefaultA serious failure to meet the terms of your mortgage — usually missing several payments. Default is what triggers the foreclosure process.
Sources and method
The card shows required household debt payments as a share of disposable personal income. The card and chart read the stored series, print at its published precision and provide exact plotted values in the downloadable CSV.
- Federal Reserve Board — Household Debt Service and Financial Obligations Ratios, at federalreserve.gov
- FRED — Household Debt Service Payments as % of DPI (BOGZ1FL010000346Q), at fred.stlouisfed.org
- Federal Reserve Bank of New York — Quarterly Report on Household Debt and Credit, at newyorkfed.org
- Bureau of Economic Analysis — Personal Income and Outlays, at bea.gov
- Federal Reserve Board, at federalreserve.gov
We write with assistance from AI tools. Figures come from the data and sources named on this page.