Calculations by staff at the Federal Reserve suggest that the ratio of household liabilities to annual after-tax income for the top fifth of all households ranked by income rose from about 1.1 at the end of 1998 to 1.3 at the end of 2001. The increase for the lower four-fifths was not quite half as large.
Although high-income households should not experience much strain in meeting their debt-service obligations, others might. Indeed, repayment difficulties have already increased, particularly in the subprime markets for consumer loans and mortgages. Delinquency rates may well worsen as a delayed result of the strains on household finances over the past two years.