Jamaican households are servicing three times more debt than a decade ago.

The Bank of Jamaica (BOJ) is reporting that $56.60 of every $100 of household income goes towards the servicing of personal loans, the highest level mapped by the central bank to date.

The underlying reason for the rise relates to consumer loans growing three times as fast as income, each year, according to the central bank’s newly released Financial Stability Report 2018.

“Total real household debt to real disposable income has trended upward, reflecting increasing indebtedness,” the report noted.

In 2009, household debt was the equivalent of $17 per $100 of income. At that time, the BOJ described the movement as a deterioration of household income “well above” average levels prior to the 2008 financial crisis.

“Prior to the global financial crisis in 2008, real growth in household sector debt averaged 13.7 per cent for the period 2003 to 2007,” stated the BOJ report. The 10-year average – 2009 to 2018 – now hovers at $46.40.

Despite the rise, the BOJ categorised the household debt-servicing ratio as “moderate” over the review period.

Auto loans are one of the most sought-after products, and banks have been helping to drive the demand with single-digit rates, pre-approved loans, new credit cards, and increased credit card limits.

The BOJ said the lenders are seeking out opportunities to grow their loan books with Government’s reduced appetite for debt. The effect is a more stable macroeconomy but one in which household income grows at 3.9 per cent while household debt grows at 11.7 per cent per annum.

A banker who responded on condition of anonymity said that new banks are fuelling an already competitive sector. He reasoned that while the debt figure appears alarming, that it also reflects a widening of the employment sector and a lowering of interest rates, thereby allowing more persons to qualify for loans.

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