Irish household debt falls but levels still high compared to EU neighbours

Household debt fell in the third quarter of 2018, reaching its lowest level in 13 years, according to the latest figures from the Central Bank.

The Central Bank said household debt fell by €518 million in the third quarter to €137.5 billion, or €28,316 per capita, at the end of the three-month period, the lowest point since 2005.

The figures also showed debt sustainability continued to improve, with household debt as a proportion of disposable income falling two percentage points month-on-month to just under 126 per cent. That is the lowest point since the fourth quarter of 2003. Over the year, that figure was a decline of 11.1 percentage points, the largest decline among the most highly indebted EU countries.

Despite the decline in debt levels, compared to other EU countries, Irish households are still relatively highly indebted, the Central Bank said. The Republic now ranks fourth in terms of debt to disposable income; the most indebted country is Denmark.

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House prices

Rising house prices have helped to lift household net worth, which rose by 1.6 per cent, or €11.8 billion, to €769 billion. Over the three-month period, housing assets rose in value by €12.5 billion. Since a low reached in the second quarter of 2012, household net worth has risen by 78.7 per cent, mainly due to increasing house prices.

In the same period, financial assets only rose by 18.6 per cent, compared with 81.3 per cent for housing assets over the same period.

Households invested more in financial assets – mainly an increase in currency and deposits – during the quarter, rising €207 million to €1.4 billion compared to the previous quarter. Deposits increased by €89 million during the quarter, rising to €953 million.

Meanwhile, private sector debt as a proportion of GDP fell by 1.7 percentage points, reaching 239 per cent, its lowest level since the fourth quarter of 2007. This was attributed to rising GDP, although it was partially offset by an increase in non-financial corporations debt.

Government debt rose by €1 billion, partly due to the issuance of €400 million in government debt securities during the quarter. At the end of the third quarter of 2018, government debt stood at €236.3 billion.