Irish now owe less debt – but it’s still €30,199 per household

We're paying down our debt – but we are still the fourth most indebted country across Europe, new figures from the Central Bank show.

According to the Central Bank's latest Household Credit Market Report, Irish households continued to pay down debt during the fourth quarter of 2016, down by €3.9 billion to €143.8 billion.

Household debt has now fallen every quarter since its peak of €203.7 billion in the third quarter of 2008, indicating that on a per capita basis, household debt stands at €30,199.

Other indicators, such as the debt-to-disposable income ratio and the debt-to-asset ratio are also declining, down from 151.1 in Q4 2015 to 140.9 in Q4 2016, and from 19.3 in Q4 2015 to 17.8 in Q4 2016, respectively.

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“Both indicators suggest a continued improvement in the sustainability of household balance sheets,” the Central Bank said.

But it’s not all good; Irish household debt continues to remain stubbornly high, and Irish households remain the fourth indebted across the Europe, behind Denmark, Netherlands and Sweden.

Mortgages

When it comes to mortgage lending, the data shows that variable mortgage interest rates fell on a year-on-year basis, at 3.75 per cent, down from 3.94 per cent in the first quarter.

However, Irish mortgage rates remain considerably higher than across Europe. In March 2017 the typical rate on a new loan was 3.2 per cent – the highest across Europe.

The data also shows a preference among first-time buyers for fixed rates, with 52 per cent of new lending to this cohort on fixed rates. Variable rates were more common among second and subsequent borrowers.

Mortgages in arrears continue to fall, declining to € 16.6 billion in the fourth quarter, but still account for about 13.4 per cent of total mortgage balances.