In a blog post, May Rostom documents that “secured debt is rising super-fast for the young.”
Over the life cycle, each generation accumulates household debt until reaching age forty or fifty, and repays afterwards. But the level of indebtedness (in real terms) has increased from cohort to cohort, and peak indebtedness has shifted to older age. The amplitude of the income paths has not changed to the same extent—“income growth has been unable to keep up with the pace of house price inflation.” Moreover, while “the younger groups have taken the lion’s share of the increase in debt from 1995-2012, … the biggest winners [when it comes to wealth accumulation] have been the older generations.”
The Economist reviews developments on the debt front:
Between 2007 and 2013 the ratio of government debt to GDP in the euro area rose from 66% to 93%. The spike was more dramatic in the periphery (see chart): in Greece the ratio increased to 175% and in Portugal it virtually doubled to 129%.
The figure in the article shows debt quotas in six countries between 2007 and 2013. The article continues:
Despite Italy’s staggering government debt, its households owe less than Germany’s and its non-financial companies not much more. Spain’s private sector has deleveraged substantially over the past few years, as big recapitalisations have left its banks better able to withstand write-downs of bad loans.
One conclusion put forward is that governments will not be able to reduce debt quotas in the foreseeable future to the levels before the financial crisis.
The ECB has published the results of the Eurosystem’s first Household Finance and Consumption Survey. Some results:
- About 60% of households in the euro area own their main residence—with or without a mortgage. About 11% own a business, and 76% own vehicles.
- 97% of households own sight deposits or savings accounts. Some (33%) hold voluntary private pensions or life insurance and few (15%) own other financial assets. Only a quarter of households in the top income quintile holds mutual funds; also, a quarter of households in the top income quintile holds publicly traded shares.
- 23% of households have mortgage debt and 29% have non-mortgage debt. Conditional on having debt, the median value is Euro 68400 and Euro 5000, respectively.
Here are the mean and median net wealth statistics by country and socioeconomic characteristic.