Irish household debt burden ‘remains huge’

Senior debt advisers have warned that households continue to face paying down intolerable debt burdens despite new official figures showing that overall personal debt levels had fallen to a 10-year low.

The total sum of the country’s household debt stood at €157bn in the final quarter last year, equivalent to a debt of €34,069 owed by every person in the State, but down by 1.6% from the previous quarter, said the Central Bank.

The bank’s latest quarterly financial accounts also showed that overall debt had fallen by almost 23% from a peak in the third quarter of 2008, while the measure of household debt sustainability had also improved.

Debt as a proportion of household disposable income fell to just over 170%, down from a level of 198% in 2013, and its lowest level since late 2005.

Mortgage debt repayments and rising house prices helped increase the net worth of households to €600.8bn, or €130,331 per person, its highest level since late 2008.

However, the debt legacy of the banking and economic collapse remains an intolerable burden for many thousands of households, which the improving economy will do little to improve any time soon, personal insolvency experts said.

“The central bank figures showing the improving outlook for household debt are very welcome, but falling unemployment and more jobs are not going to make this problem go away,” said Michael Dowling, a senior debt adviser.

Mr Dowling urged the Government to press ahead with plans to reform the insolvency debt regime to encourage more people to strike formal deals over their secured and unsecured debt with their lenders.

Streamlining the application process for debt relief and insolvency notices would probably do more for deeply indebted households than softening the veto held by banks over striking debt deals, he said.

Ireland’s household debt burden was the third highest in Europe in 2013, recent central bank research showed, with only Denmark and the Netherlands holding higher debt levels as a proportion of their household disposable incomes.

The Central Bank said yesterday said that Ireland’s indicators of household debt remain high by international comparisons.

Gerry Dowling (no relation), a co-ordinator with the Government-funded Money Advice and Budgeting Service in Dublin, said the number of people seeking advice form MABS had fallen from the sky-high levels during the worst of the crisis four years ago, but that the complexity of household debt problems were if anything deepening.

He said most banks were still refusing to deal in an adequate way with household debt and were baulking at writing down unsecured debt. Mr Dowling cited a case of a young woman client, who though now on social welfare, was still facing a demand from a lender to repay over €351 a month on a small business loan of €17,365. “Unsecured debt is still a major problem,” he said.

The Central Bank report said that overall debt held by non-financial corporations fell for the fourth consecutive quarter to 185% of GDP late last year, because the economy had grown.

The drop came despite the value of such debt rising by €3.08bn over the quarter.

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