# personal private sector debt



## bearishbull (29 Apr 2006)

personal debt levels are at around 120billion and is growing as 29% per annum! even if it slowed to 25% and grew at this rate for next decade to keep pace with house price growth etc predicted by ncb et al then we would owe a trillion euro at that stage!! thats 200k  for every man woman and child! average couple with two kids would owe 800k! servicing the debt alone  at 5% would cost 40k a year! so when do you see the massive growth in the debt mountain slowing down? as rates rise in next 2 years or will the binge continue untill we are swamped with debt and economy comes off the rails?


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## room305 (2 May 2006)

I think the rate rises will accelerate the level of personal debt taken on. With more of their discretionary spending swallowed up by the monthly mortgage payment, people will simply purchase more items on credit. When this credit gets out of hand, they will make it *disappear* by consolidating it and adding it to their existing mortgage debt.

I think the rapid rise of house prices has bred a complacency about personal debt levels. When you already owe €300k to the bank, a further €3k owed on the credit card seems somewhat trivial. Many will feel that the capital appreciation of their own homes is more than adequate to service any extra debt they have taken on.

So in short, yes I think there will need to be a major economic slowdown before we see the the growth rate of personal debt start to slow.


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## bearishbull (2 May 2006)

its completely unustainable and will hit a wall when rates rise further and houses cant be afforded anymore which will be case in next few years.


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## ClubMan (2 May 2006)

bearishbull said:
			
		

> personal debt levels are at around 120billion and is growing as 29% per annum!
> 
> ...
> 
> thats 200k  for every man woman and child! average couple with two kids would owe 800k!


 Can you clarify where these figures come from please?

According to the _Central Bank _(see Finfacts summary) private sector credit is c. €268Bn while housholds account for "just" 46% of this or €123Bn. According to the [broken link removed] there are around €1.3M private housholds in the state (2002 figures) which means that the average houshold debt should be nearer €100K by my calculations. Not peanuts but perhaps not quite the picture of doom and gloom that some people might paint?


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## bearishbull (2 May 2006)

ClubMan said:
			
		

> Can you clarify where these figures come from please?
> 
> According to the _Central Bank _(see Finfacts summary) private sector credit is c. €268Bn while housholds account for "just" 46% of this or €123Bn. According to the [broken link removed] there are around €1.3M private housholds in the state (2002 figures) which means that the average houshold debt should be nearer €100K by my calculations. Not peanuts but perhaps not quite the picture of doom and gloom that some people might paint?


the  figures are hypothetical projections of debt in a decades time if it continues growing at near to current rate.


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## ClubMan (2 May 2006)

But you are applying projected house price inflation to all credit, not just mortgage credit - that does not make sense.


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## conor_mc (2 May 2006)

bearishbull said:
			
		

> the figures are hypothetical projections of debt in a decades time if it continues growing at near to current rate.


 
I think NCB were rightly lambasted for simply extrapolating current trends 10-15 years into the future in their recent opinions on the economy/immigration/etc, but it seems that even the bears are a bit prone to that too....  

To be honest, burgeoning personal credit won't slow down until the banks take action to reign it in. Some people are savvy enough to realise that there's a big problem staring us in the face, but the majority don't see that and are happy enough to just take whatever the banks will offer them as and when they want it.

I think the key will be if/when the banks start to tighten their belts... because its unlikely Joe Public will do that of their own accord. Lengthening mortgage terms isn't helping the situation, offering 100% mortgages certainly doesn't help things, and offering credit cards with limits in the €,000's to people with low incomes doesn't help either.


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## bearishbull (2 May 2006)

ClubMan said:
			
		

> But you are applying projected house price inflation to all credit, not just mortgage credit - that does not make sense.


no im applying the growth in non business private sector debt to the current levels of that debt for next ten years, has nothing to do directly with house price inflation.its for illustrative purposes,obviously(hopefully) the growth will slow back to eu average which is around one third of our debt growth rate.


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## lff12 (4 May 2006)

To be honest these are all average figures - and CSO is notorious for not giveng medians, modes and weighted averages that would make these sats more meaningful.  It would be more useful if we knew:

1. How many are debt free
2. Relationships between incomes and debts
3. Profile of those hevily indebted

Might make a nice masters thesis for somebody studying economics...


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## conor_mc (4 May 2006)

I'd imagine a large amount of current private debt will be serviced by impending SSIA payments, so maybe it isn't all doom and gloom.


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## DrMoriarty (5 May 2006)

Even if they don't spend a cent of their SSIA money on anything other than reducing their private debt — which seems psychologically implausible, from one point of view — many individuals may only be making a modest dent in their overall debt. I sense trouble ahead... 

Some possible [broken link removed] from 'across the water'?


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## SpatenMan (5 May 2006)

But Ireland is different Dr...............it won't happen here !!!!!!!


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