US consumer credit and mortgage borrowing expanded rapidly prior to the 2008-2009 financial crisis, allowing relatively unsophisticated consumers to decide how much they could afford to borrow. As a consequence, Americans today are more likely to enter retirement in debt than ever before, which poses some concerns. For one, higher debt levels make older households quite sensitive to rising interest rates. For another, retirees may need to devote a growing fraction of their incomes to servicing the rising debt.Various explanations have been offered for the rapid increase in debt among the population at large, including the rise in house prices during the 2000s and the growth of easier mortgages (e.g., Dynan and Kohn 2007; Mian and Sufi 2011). Another is that technological change in the lending market induced risk-based pricing and made it easier for households to borrow (Edelberg 2006; Dynan 2009). Moreover, unin-formative sales tactics have "shrouded" customers' understanding of financial contracts and boosted total amounts borrowed (e.g., Gabaix and Laibson 2006).
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