Consumer indebtedness dropped by 0.6% in the third quarter as mortgage balances and credit card limits continued to decline, according to a report by the New York Federal Reserve. Aggregate consumer debt fell approximately $60 billion to $11.66 trillion in 3Q, down from a revised $11.72 trillion in the second quarter, the Fed said. "The decline in outstanding consumer debt reveals that households continue to try and deleverage in the wake of a challenging economic environment and large declines in home values," said Andrew Haughwout, vice president in the research and statistics group at the New York Fed. "However, our findings also provide evidence that consumer credit demand continues to increase, a positive sign for consumer sentiment." Mortgage balances on consumer credit reports fell by $114 billion, or 1.3%, over the third quarter while home equity lines of credit balances increased by roughly $14 billion or 2.3%. The Fed report does not specify if HELOC balances are rising due to more credit lines becoming available to homeowners, or an uptick in delinquencies where fees for nonpayments push balances higher. About 2.5% of current mortgage balances transitioned into delinquency in the third quarter, reversing a recent trend of reductions. New foreclosures decreased 7% quarter- over-quarter, and bankruptcies declined 18.8% over year-ago figures. Indebtedness unrelated to real estate now stands at $2.62 trillion, about 1.3% above its 2Q level. Aggregate credit card limits declined by about $25 billion slightly offsetting increases from earlier this year. Open credit card accounts declined by 6 million to 383 million in the third quarter, and credit card borrowing limits fell again, partially offsetting some gains seen earlier in the year. Open credit card accounts for third quarter were about 23% below the peak in second quarter 2008 while balances on those cards were nearly 20% below their highest levels in the fourth quarter of 2008. Credit account inquiries within six months — an indicator of consumer credit demand — increased for the second quarter in a row. Overall delinquency rates increased to 10% as of the end of September, compared with 9.8% at the end of June. In August, a study from the Federal Reserve Bank of Cleveland showed households were deleveraging at a rapid pace since the financial crisis of 2008. Household debt burdens, according to its study, are heading toward a 20-year low. Write to Kerry Curry. Follow her on Twitter @communicatorKLC.