Household debt remains high at €30k

The average Irish household owes over €30,000 — making Ireland the fourth most indebted country in the EU, the Central Bank has found.

In its latest Household Credit Market Report, the watchdog said Irish household debt continues to fall, but is behind only Denmark, Holland, and Sweden compared to the rest of Europe, owing €30,199.

Debt continues to be paid off, however, with almost €4bn paid off in the last quarter of 2016 to leave the overall figure just under €144bn. Irish household debt has declined in every quarter since its peak of almost €204bn during the third quarter of 2008. Debt has now fallen by 29% since the peak.

The overall value of mortgages in arrears continues on a downward trend, the watchdog said, falling to €16.6bn in the final quarter of 2016, or just over 13% of total mortgage balances.

The arrears rate on non-mortgage loans is also on a declining trend, the Central Bank said, while credit card and overdraft debt continues to fall.

The report found that in the last quarter of 2016, the year-on-year growth rate in mortgage credit for family homes was positive, but remained negative for buy-to-let loans.

New mortgage approvals and drawdowns increased year-on-year in the first quarter of 2017 by value and volume. First-time buyers continue to account for the largest share of new lending, at almost 50%.

The Central Bank said in the first quarter of 2017, the average standard or loan-to-value variable interest rate on family home mortgages in Ireland stood at 3.75% on outstanding loans, a fall of almost 4% in the first quarter of 2016.

Fixed mortgage rates on new and outstanding lending have also fallen over this period. For first-time buyers, 52% of new lending was agreed at fixed rates between July and December 2016, of which 40% were fixed for over one year maturity.

Variable rates were more common among second and subsequent borrowers and buy-to-let, at 53% and 91% of new lending. The report showing the average loan-to-income ratio on new lending at 2.9% indicates consumers are not over extending themselves, the Professional Insurance Brokers Association said.

It said the report showed more experienced borrowers have “correctly judged that the so-called fixed mortgage rates, typically between one and three years, are generally poor value”.

Chief operations officer of the brokers association, Rachel McGovern, said although there has been some improvement on lowering interest rates, a lot more needs to be done to arrive closer to European norms.

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