Czech household debt rises but default risk down

Photo: Ondřej Tomšů

Czech household debt reached 2.18 trillion crowns in the first quarter of 2018, according to data released by the Banking and Non-banking Credit Register on Wednesday. Year-on-year, the Czech household debt burden increased by over 175 billion crowns, or 8.7 percent.

Photo: Ondřej Tomšů
On the other hand, high-risk debt (debt which is unlikely to be paid on time) dropped by 4.5 billion crowns to 36.6 billion crowns. The number of people who have trouble repaying their mortgage loans dropped by 5,000 compared with the same period in the previous year. The number of clients who didn’t pay off other loans dropped by 10,000.

The overall amount of high-risk debt, where clients failed to pay off at least three instalments in a row, has been decreasing for four years in a row.

“We can see two positive trends associated with the long-term decrease of the overall amount of unpaid loans and both of them are linked to the economic situation in the Czech Republic. “First of all, the number of people having trouble repaying household loans is decreasing, and second, the average unpaid amount is getting smaller,” executive director of the Banking and Non-banking Credit Register Lenka Novotná told the Czech News Agency.

The number of clients who have trouble repaying long-term loans debts totalled about 24,000 last year, which is a drop by nearly one third over the previous three years. The number of clients who have trouble with repaying short-term loans has dropped as well and currently concerns 281,000 people.

Meanwhile, the overall debt burden keeps increasing and so is the average sum Czechs owe to banking institutions. While the number of clients remains more or less the same as in the previous year, the average loan increased by nine percent in case of long-term loans and by eight percent in case of short-term loans.

At the moment, every person with a housing loan owes on average 1.55 million crowns, while the average short-term loan has reached 183,000 crowns.

The Czech National Bank has sounded the alarm in recent months over the risk of Czech house buyers taking on too much debt and tightened mortgage rules as a result.