Abstract
Since the mid 1980s consumer credit has grown rapidly in most European countries. However, the amounts borrowed by households as a proportion of income differ widely from country to country. These differences can be ascribed to a variety of factors, some of which have been extensively analysed in the literature,1 that influence the demand for and supply of credit and, consequently, the size of national household credit markets.
In this chapter we will examine, through the use of macroeconomic data, the evolution of national consumer credit markets. We will then analyse the social, demographic and economic characteristics of indebted households based on information available from national surveys carried out periodically by National Central Banks and/or statistics institutes.
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- 1.
A detailed analysis of theoretical and empirical studies into the determinants of the demand for and supply of consumer credit is given in Chap. 1.
- 2.
The macroeconomic analysis was carried out using the 27 countries that currently make up the European Union. Any absence in charts 2.1–2.6 of one or more countries is due to unavailable data. In particular, consumer credit data are not available for Cyprus, which as a result is not included in the analysis.
- 3.
The period under analysis could not be extended beyond 2000 due to a lack of data for many of the new EU Member States.
- 4.
Article 313–3, Code de la Consommation.
- 5.
“Family policy is likely to have an impact on firm creation: subsidies to large families, easier access to credit for housing or lower taxes are elements that may have unexpected effects on business creation through the channel of informal loans. An easier access to credit for housing may lead business creators to ask for that type of credit in order to have access to a financial basis that could also be used to start a business” (Tardieu 2007).
- 6.
For an example of cross-country analyses, see European Central Bank (2006).
- 7.
- 8.
For an analysis of how the existence of information sharing mechanisms amongst lenders affects credit availability, see Jappelli and Pagano (2006).
- 9.
See Chap 1 for a review of economic models within Permanent Income and Life-Cycle theories that analyse spending, savings and indebtedness choices.
- 10.
- 11.
- 12.
Question c31 (SHIW 2006): “We will now talk about debts taken out to meet needs of the household and the house (do not consider debts in connection with your business). At the end of 2004 vis-à-vis banks or financial companies or for instalment payments did your household have a) debts for the purchase or restructuring of buildings? b) debts for the purchase of real goods (e.g. jewellery, gold, etc.)? c) debts for the purchase of motor vehicles (e.g. cars)? d) debts for the purchase of furniture, electrical appliances, etc? e) debts fir the purchase of non durables goods (e.g. holidays, furs, etc.) or for any other reasons? If the answer is “yes”, how much in total would you say was owed on these commitments at 31 st December 2004?” The variable “consumer credit” was established on the basis of affirmative replies to b), c), d) and e).
- 13.
Question 3.1 (EFF 2005) “How many loans other than those already mentioned do members of the household or individual firms that belong to any member of the household have? Please exclude those taken out to pay for the purchase of the main residence or other properties which have already been talked about”. Question 3.5: “What is the initial amount of each loan?
- 14.
Questions f56 e f57 (BHPS 2005) “I would like to ask you about any other financial commitments you may have apart from mortgages. Do you currently owe any money on the things listed on this card? hire purchase agreements, personal loans (from banks, building societies or another financial institution), credit cards, catalogue or mail order purchase agreements, DWP Social Fund loans, overdraft, student loans, any other loan from a private individual or anything else. About how much in total is owed on this/these commitments?”.
- 15.
Question c29 (present only in the SHIW 2004) “What is your household’s present financial situation? We need to borrow, we need to withdraw from savings, we only just meet our budget, we manage to save a little, we manage to save a fair amount, we don’t know?” Question e12 (present from SHIW 2002 onwards) “Is your household’s disposable income enough for you to get through the month? With a great deal of difficulty, with difficulty, not easily, fairly easily, easily, very easily”.
- 16.
Question 9.7 (EFF 2005) “Would you say that over the last twelve months your household expenses have been higher, lower or the same as your income? Do not include any expenditure buying your home or any financial investment you have made”.
- 17.
Question f4 (BHPS 2005) “How well would you say you yourself are managing financially these days? Would you say you are living comfortably, doing alright, just about getting by, finding it quite difficult, find it very difficult, other?”.
- 18.
The percentage was calculated making reference to each variable chosen. For instance, as regards the age variable, households were classified on the basis of the age group of the head of the household and then, for each sub-group, the percentage of households holding unsecured debt was calculated.
- 19.
Demand for credit here is intended as the demand formally accepted by the financial system. The existence of potential demand rejected by lenders does not appear in the surveys; the inclusion of such information could produce a demand variable that differs from country-to-country and from one period to another.
- 20.
Low-income individuals belong to the first income quartile, with the following maximum income levels per country: United Kingdom – GBP 5,000; Italy – euro 14,000; Spain – euro 14,000. The category “unemployed” includes also the retired.
- 21.
According to the standard Life-Cycle theory, the demand for credit should be made on the basis of increased expected incomes and should, as a result, be higher amongst young people and those with high educational qualifications as these individuals forecast higher future income flows. Similarly, demand for credit should be higher amongst individuals with higher job status and/or higher current income as these will enjoy easier access to the credit market.
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Vandone, D. (2009). Household Consumer Credit Demand. In: Consumer Credit in Europe. Contributions to Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-7908-2101-7_3
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