2018 Financial Stability Report

Figure 9: Household and Private Business Credit (in per cent of GDP)

A high level of debt can pose risks by increasing potential losses to lenders. It can also increase the likelihood of sharp cuts in consumption, especially by highly indebted households, which may amplify a downturn. This in turn increases the risk of losses to lenders on all forms of lending. Additionally, the efficiency of the financial system can be compromised if high levels of household debt inhibit the flow of credit to creditworthy borrowers. Households continued to benefit from the economic recovery and the low interest rate environment in 2018. Although household debt levels have been declining since the global financial crisis, households remain vulnerable. Household debt to GDP was 34.0 per cent at the end of 2018, 8.9 percentage points below its maximum value of 42.6 per cent (Figure 9).

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Jun-98

Jun-01

Jun-04

Jun-07

Jun-10

Jun-13

Jun-16

Dec-96

Dec-99

Dec-02

Dec-05

Dec-08

Dec-11 Buisness

Dec-14

Dec-17

Household Credit

Source: ECCB and Author calculation

Approximately 56.0 per cent of bank lending was to the household sector, which gave rise to a concentrated loan portfolio, with particularly large concentrations of debt for the acquisition of property, (mortgage related debt). Mortgages represented 30.0 per cent of all lending and 55.0 per cent of the total credit extended to households see (Figure 10).

Figure 10: Composition of Household debt

Other personal credit 40%

House and Land Credit 55%

Durable Consumer 5%

Source: Eastern Caribbean Central Bank (ECCB)

Financial Stability Report 2018

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