Consumers cut the amount of disposable income going toward debt repayments, such as mortgages, to below the average measured in the 1990s, according to the Federal Reserve Bank of Cleveland. Researchers said much of the drop likely stems from historically low interest rates, which press such payments downward. The Cleveland Fed measured consistent declines in debt levels since the third quarter of 2008. “The ratio is now well below the average levels seen from 1990 to 2000, and it is rapidly approaching its lowest levels since 1993 to 1994,” researchers said. Consumer spending represents 70% of GDP and consumption growth is recovering since the crisis in 2008. Income growth, however is currently moving toward levels measured during times of economic stress, and while consumption growth continues upward, it barely reached its 20-year average in 2010.

Researchers said the contraction in income, consumer spending and borrowing, is also explained by higher-than-average defaults on mortgages and other loans. Even as banks continue to charge off mortgages at high-levels, they are loosening standards on other debt, especially credit cards, researchers said. According to a study from consumer credit firm Experian, delinquencies in credit cards are improving at a far greater clip than mortgages. The Cleveland Fed said the as consumers continue to deleverage at such a steep clip, new lending may begin to ramp up. “While the (debt-to-income) ratio may potentially undershoot its long-term average, its sharp decline since 2008 indicates that the debt-service burden has fallen substantially, which may make borrowers more inclined to borrow again and financial institutions more willing to lend,” researchers said. Write to Jon Prior. Follow him on Twitter @JonAPrior