Loading...
See More

FNB: Household debt improving

Dec 12 2011 12:05 I-Net Bridge

Related Articles

Household debt at 2006 levels

FNB: Households see reduced debt pressure

Cape households have biggest debts

Councils owed billions in debt

Protect your bonus

EU leaders agree on fiscal pact

 
Johannesburg - Household debt-service looks to have improved, according to FNB's Household Debt-Service Risk Index which has found a mild third-quarter decline to a level of 6.03 from a previous quarter's index level of 6.10 (on a scale of 1 to 10).

John Loos, household sector and property strategist at FNB Home Loans, said this represented the third consecutive quarter of decline in its simple measure of household debt service risk.

He said that while a gradual improvement (decline) in household debt service risk in 2011 had been seen due to a declining trend in the household debt-to-disposable income ratio, the 6.03 index level remained relatively high and was still well above the 31 year average of 5.2.

Loos warned it was not yet time for the household/consumer sector to declare victory in the "balance sheet rebuilding" exercise.

The index was compiled from three variables: the debt-to-disposable income ratio of the household sector, the trend in the debt-to-disposable income ratio, and the level of interest rates relative to long-term average (five-year average) consumer price inflation.

The index owed its decline to the declining trend in the household debt-to-disposable income ratio, with households growing their borrowing cautiously at rates slow enough to allow disposable income growth to outpace borrowing growth.

Loos pointed out that the one variable which contributed negatively to the overall index was the measure of the real interest rate, which continued to decline as the recent rise in consumer price inflation continued to push up the five-year average inflation rate, bringing it nearer to the currently static 9% prime rate.

He said this increased the risk that we were near the bottom of the interest rate cycle, and also heightened the risk of future upward moves in interest rates.

The bottom of an interest rate cycle is generally the riskier period in which to lend/borrow as compared to its peak, which is not always understood by lenders or borrowers.
consumer spending  |  sa economy  |  household debt  |  debt
NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Add your comment
Comment 0 characters remaining
 

Company Snapshot

sponsored content
Sanral arrogant and evasive - JPSA 2014-09-04 09:13

Lawyers representing Justice Project SA have labelled responses they received from Sanral's legal team relating to e-tolls as surprisingly arrogant and evasive.

We're talking about:

Small Business

Retailers of any shape and size can now unlock the power of mobile transacting.
 

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...
Loading...