US/EU household debt will be less contagious than 2007

Subject

Household indebtedness in advanced countries.

Significance

US household indebtedness has declined since 2007. The euro-area average is broadly unchanged, but while household debt has declined in most countries, it has increased strongly in others.

Impacts

• The most immediate risk is the possibility of a sharper economic downturn jeopardising the ability to repay of the lowest-income households.
• The burden of interest payments has fallen sharply over the last decade and will remain low, even in countries where indebtedness is high.
• In the longer run, countries where most housing loans are at fixed rates will be at an advantage.