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Savings & Retirement

The American Consumer Is Flush With Cash After Paying Down Debt

  • Ultra-low mortgage rates spur refinancing, equity cash-outs
  • JPMorgan’s Lake: savings provide ‘enough juice’ for consumers

Eight months into the pandemic, Americans’ household finances are in the best shape in decades.

It’s a seemingly incongruous thought, what with the widespread business lockdowns earlier in the year and coinciding surge in unemployment -- and it certainly doesn’t apply to all families equally. But it points to just how strong the U.S. economy was going into the virus outbreak, and how powerful the combined monetary and fiscal response was from the Federal Reserve, Congress and the Trump administration.

Record-low mortgage rates, reflecting the ultra-easy Fed policy, have prompted a steady wave of refinancing and allowed homeowners to reduce monthly payments or tap equity. Americans are also holding more cash, helped in part by stimulus from the government.

Households’ debt service burdens have eased considerably, too, a complete departure from the 2007-2009 financial crisis that required years to mend. That in turn bodes well for consumer spending and its ability to power the economic recovery through a period marred by a violent spike in virus cases.