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Dáil Éireann Debate, Wednesday - 16 February 2022

Wednesday, 16 February 2022

Questions (83)

Peadar Tóibín

Question:

83. Deputy Peadar Tóibín asked the Minister for Finance the total level of private debt in the State currently, by each sector of Irish society; the level of debt arrears currently within the State by each sector in Irish society; the number of persons and businesses that are in debt arrears in the State by each financial institution; and the effect that the projected increase in interest will have on servicing private debt and on arrears. [8543/22]

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Written answers

I have been informed by the Central Bank that it compiles information on the assets and liabilities of institutional sectors as part of the Quarterly Financial Accounts (QFA). The latest QFA statistics show that Irish private sector debt stood at €808bn in Q3 2021. As a proportion of GDP, private sector debt continues to decline and stood at 197 per cent in Q3 2021.

Private sector debt is broken down into the debt of Non-Financial Corporations (NFCs) and Households. In the case of NFCs, total debt stood at €680bn at Q3 2021. As a proportion of GDP, NFC debt stood at 166%, its lowest level since 2008. It should also be noted that the QFA is compiled for the NFC sector on an aggregate level and a further breakdown of NFC debt by financial institution is not published.

Household debt stood at €128bn or €25,568 per capita in Q3 2021, a decrease of 37% from its peak in Q3 2008. As a percentage of household disposable income, household debt stood at 100 per cent in Q3 2021, an all-time series low.

In terms of debt arrears, the Residential Mortgage Arrears and Repossession Statistics (available at www.centralbank.ie/statistics/data-and-analysis/credit-and-banking-statistics/mortgage-arrears) indicate there were 60,971 accounts in mortgage arrears of 30 days or more as at end-Q3 2021, with 47,681 accounts relating to Principal Dwelling House (PDHs), and 13,110 relating to Buy-to-lets (BTLs). The total arrears balance was €2.83bn, with €2.74bn relating to PDH accounts.

Focussing on loans held by retail banks, the Non-Performing Loan ratio for lending to businesses was 8 per cent in 2021q3.

On debt arrears broken down by individual financial institution, this information is not publically available from the Central Bank of Ireland, but to the extent this information is available it would be disclosed in the accounts of the relevant institutions.

The Central Bank does not currently have direct analysis published on the issue of potential increase in repayment burdens or arrears resulting from increases in interest rates. However, the recent Financial Stability Review highlights that half of the balances owed by Irish SMEs to the retail banks have fixed interest rates, meaning that sudden interest rate rises would only impact borrowing costs if or when loan facilities are renewed. In addition, a growing number of households have short-term fixed interest rates, which will provide initial protection against potential interest rate rises.

To help ensure the sustainability of the macroeconomic environment, the Department monitors interest rate developments on an ongoing basis. As part of both the Budget and the Stability Programme Update, baseline interest rate expectations are incorporated into the forecasts. In additional the Department has also previously simulated the impact of different stylised shocks, such as interest rate shocks, as part of the sensitivity analysis of the forecasts.  The most recent published example is in Budget 2020, which included a hypothetical monetary policy shock that assumed the ECB policy rate increases by 1 percentage point.

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