Jamaican households are increasingly living beyond their means as more than half of their disposable income goes towards paying back loans, a trend that concerns the financial stability committee enough for it to consider studying its drivers.
Household debt reached its highest level in a decade, with more than half of disposable income—that is, $54.20 of every $100—going towards the servicing of personal loans, as at last September, according to the Fiscal Stability Report 2017 released by the central bank this month, Jamaica Information Service News reported.
Last year, the ratio of real household debt to disposable income deteriorated at 54.2% was trending well above the 10-year annual average of 42.9%, said the report.
In the most recent breakdown of loans issued by commercial banks, personal loans are at the highest level they have ever been, according to provisional data compiled by the Bank of Jamaica.
As of January 2018, the loan market in the commercial banking sector was valued at $616 billion, with personal loans accounting for $308 billion of the industry total. One of the drivers of the trend has been reported to be increasingly attractive auto loans that are now priced at single-digit rates.
A decade ago, the year-end ratio was 38%, and the decade before that it was 19%, according to central bank data.
The debt servicing burden of households has generally trended upward since 2011, the stability report noted. It also noted that the stable macroeconomy as well as the government of Jamaica’s reduced need for debt—eliminating its crowding out effect—has created an opportunity for expansion of private sector credit.
