Saturday, 21 January 2012

Finnish Household Debt and Income: Alarming Signals

Rates of indebtedness of indebted household-dwelling units by age group 2002-2010, %,

The chart above was extracted from a nice article from Statistics Finland. The article start with a sentence that put the tone on a very important subject: indebted household due to large housing mortgage.

"During a decade, household-dwelling units’ debts have gone up by clearly more than their income."

Also, you will notice that the debt level among the 30-39 years old is at an alarming level and has been rising steadily without any disruption since at least 2000 - the 2008 crisis had only a minor impact, just slowing the progress, not stopping it.

What to think? well clearly we at unsustainable level where any shock could weaken the financial situation of household - especially those who are counting on an ever increasing housing price or on low interest rates.


Anonymous said...

The figures for the 50+ band scares me!

I know that they are the age with the lowest ratio of debt, but it is the group that is coming towards the end of their working life (or have already retired) and on average owe one full year's income! How are they to manage when their work finishes, and they have to live on a pension and so live with less income? It looks like many are set to be very poor during their last years (this seems to be true even if there is not house price collapse).

"Island Crow"

Anonymous said...

Agree with you, I was also surprised by their level of debt ... in theory, they are the ones who have already paid back in full their debt ...
Could it be that (i) it is just speculation from their perspectives, meaning that they took some debts for investing in real estate (ii) they took some debts for a second home(iii) they do a mortgage out of an "hypothetical" increase in value of their property in order to finance some renovation ...
Let s see what will happen in the coming months.

I am also very concerned with the following ... clearly is also entering in recession ...

Industrial output fell by 3.5 per cent year-on-year in November

"According to Statistics Finland, output of total industries adjusted for working days was 3.5 per cent lower in November 2011 than twelve months earlier. In October, output went down by 5.3 per cent. In the January to November period, industrial output adjusted for working days grew by 0.7 per cent from twelve months back."

HousingFinland said...

indeed I did not pay attention to the "about-to-be" retiree... How on earth were they allowed to take up some much debt (is it because it is backed by their already paid housing - kind of guarantee)? or is it simply debt that has been rolling forever?

Al in all, pension crisis is an issue that will show its ugly head sooner rather than later in Finland.

Andrew said...

The chart only shows a rate of debt for people, who live as 'a household' where the household has debt.

Households in their 50's with no debt would not be on this chart.

Households of 18 years olds with no debt would not be on this chart.


Also the older you get then the more complicated and involved your finances become. 50 years olds who appear to have debts could have investments that are not obvious to

You know what they say about statistics.

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