The increase in total household debt is due to more newly extended than redeemed existing residential mortgages. Non-mortgage consumer debt fell slightly; student loan debts went up, but other non-mortgage debts including consumer loans declined.
The central focus of this news release is on the development of debts in the private sector. Aside from debts, households and businesses also have financial assets (including money, shares and participations) and physical assets (such as property). These assets as well as the collective savings of households (pension contributions) shall not be taken into consideration here.
Household debt rising slightly as of September 2014
After a period of decline, household debts started rising as of September 2014, in particular the level of residential mortgage debt. The latter increased from 649 billion euros at the end of September 2014 to 669 billion euros at the end of June 2017. In the same period, non-mortgage debt rose from 88.5 to 91 billion euros. Student loan debt increased, but other non-mortgage debts including consumer loans declined.
Non-financial sector debt ratio down due to currency movements
Non-financial corporation debt not only includes loans but also debt securities, mainly bonds. These securities are valued at market value. In Q2 2017, the decrease in debts was caused by falling market prices of securities and exchange rate movements. Interest rates in the capital market rose, decreasing the value of bonds. In addition, the euro exchange rate strengthened against other currencies such as the US dollar and the British pound. Foreign currency debts expressed in euros declined as a result. At the same time, businesses took out more loans than were repaid. The balance of loans and securities issued and amounts outstanding was 4.3 billion euros.
Debt levels of non-financial corporations have hovered around 800 billion euros since the beginning of 2015. The sharpest rise was seen in Q4 2014; as of that quarter, cash pools are being recorded as gross overdrafts instead of netted in the National Accounts balances as was the case previously.
Debt ratio of households and non-financial corporations down
Despite increasing debt levels, household debt as a percentage of GDP declined in Q2 2017, because the increase in GDP was stronger than the increase in debt levels. At the end of June 2017, the household debt ratio had declined to 106.1 percent from 106.7 percent in March; the ratio has been falling since Q4 2012.
In Q2 2017, the non-financial sector debt ratio declined from 114.1 to 112.7 percent. Total private sector debt amounted to 218.8 percent as a result, the lowest level since 2008. The private sector debt ratio is one of the indicators used by the European Commission as part of the macroeconomic imbalance procedure (MIP) to monitor a country’s macroeconomic imbalances. The Netherlands’ debt ratio is currently far above the threshold of 133 percent as set by the European Commission.