U.S. household debt has dropped and more consumers are paying their bills on time, signaling some growing stability among consumers in a still shaky economy.

A report released Wednesday by the Federal Reserve Bank of New York found that total household debt fell by $78 billion in the second quarter to $11.15 trillion, driven largely by declines in mortgage debt levels. That represents a 0.7 percent dip from the first quarter. This is the lowest total household debt level since 2006, when the housing bubble was at its peak.

Homeowners who survived the housing crash have been able to pay down loans, helped by lower interest rates and an improved employment picture.

Mortgages balances, the largest component of household debt, fell to $7.84 trillion in the second quarter from $7.93 trillion in the first. Home equity lines of credit fell $12 billion to $540 billion. The drops in part reflect foreclosures, which eliminate some consumer debt, along with people who sold their homes and did not make another purchase.

Meanwhile, credit card and auto loan debt increased - showing that consumers are increasingly willing to spend.

Auto loan balances jumped $20 billion from the previous quarter. This is the largest quarter-over-quarter increase since 2006. The percentage of auto loans with payments that were more than 90 days late fell to 3.6 percent, its lowest level in 5 years.

Credit card balances increased $8 billion to $668 billion, and delinquencies fell to 10 percent from 10.2 percent.

Student loan debt increased $8 billion to $994 billion in the first quarter. Despite higher student loan levels and limited job prospects for new grads, student loan delinquency rates fell to 10.9 percent from 11.2 percent.

Andrew Haughwout, vice president and research economist at the New York Fed, said that this is the seventh straight quarter that overall delinquency rates have fallen, an encouraging sign for the economy.

 

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