Latest news with #householddebt
Bloomberg
3 days ago
- Business
- Bloomberg
Thailand's Tourism Slump and Household Debt Weigh on Its Lenders
Thailand's banks are grappling with weak lending amid high household debt, slowing tourism and sluggish consumer spending that risk dampening their outlook for the rest of the year. The banks are facing lackluster earnings tied to lower net interest margins — the difference between interest income and paid interest — and muted loan growth as the country endures economic uncertainties, according to a note from Citi Research.
Malay Mail
5 days ago
- Business
- Malay Mail
Ballooning household debt in South-east Asia: The deindustrialisation trap in Malaysia — Phar Kim Beng and John Yip
JULY 20 — Rising household debt has become a defining feature of South-east Asia's economic landscape, and nowhere is this more acute than in Malaysia. Once an exemplar of export-driven modernisation, Malaysia now finds the foundation of its prosperity under strain. At the heart of this vulnerability sits a structural transition—from industrial production to consumption-led services—leaving many households with unstable incomes and a mounting reliance on borrowing. Left unchecked, this accelerating debt burden risks stalling broader development and undermining social cohesion The Alarming Numbers The scope of the problem is stark. This loss of stable, well-paying industrial work has coincided with aggressive consumer lending and a rapid normalisation of debt-driven consumption. — Bernama pic By the end of 2021, Malaysia's household debt-to-GDP ratio stood at 89 per cent, the second-highest in South-east Asia—surpassed only by Thailand (89.3 per cent) and far exceeding Singapore (69.7 per cent), Indonesia (17.2 per cent), and the Philippines (9.9 per cent). This means Malaysians shoulder nearly RM1.4 trillion in household debt, with the highest portion in mortgage and car loans (58 per cent and 13 per cent, respectively), followed by personal loans (14 per cent) and credit cards (3 per cent). Why are Malaysian households so leveraged? Structural change, rising living costs, and the ease of consumer credit all play a role. Responsible lending has helped contain system-wide risk, but a large group of over-indebted households—particularly those with high Debt Service Ratios (DSRs)—remains deeply vulnerable. Under stress scenarios, high-DSR borrowers (DSR > 60 per cent) are 5.5 times more likely to default and face financial hardship than those with more prudent debt loads. Why has household debt swelled? 1. The deindustrialisation challenge Malaysia, alongside its neighbours, was once a manufacturing powerhouse, providing stable jobs and income growth for its rising middle class. However, since the 2000s, manufacturing's share of output has steadily declined (from over 30 per cent to below 24 per cent as of 2023). The expansion of the service sector has yet to compensate in terms of job quality or security. As highlighted by the World Bank and others, the shift away from industry has produced only limited increases in high-productivity service sector employment, with many workers landing in unstable, low-wage, or informal jobs. 2. Overconsumption and easy credit This loss of stable, well-paying industrial work has coincided with aggressive consumer lending and a rapid normalisation of debt-driven consumption. Social status and aspirations are increasingly tied to visible consumption—cars, electronics, travel—even as income gains have slowed. As a result, Malaysians have resorted to credit: the ratio of household debt to GDP has remained stubbornly high, and many families borrow simply to make ends meet, not just to invest in property or education. High household debt poses a profound danger to both individual livelihoods and the broader national economy. When families become overleveraged, a significant portion of their income is redirected to servicing debt, leaving little room for savings, consumption, or investment in education, healthcare, and long-term security. This weakens domestic demand, especially in emerging economies like those in Asean, where consumption is increasingly vital to growth. Over time, households may become vulnerable to interest rate hikes or sudden job losses, which can trigger a cascade of defaults. This, in turn, affects banks' balance sheets and credit availability—creating a vicious cycle of financial distress and economic contraction. High levels of debt also lead to greater social stress, contributing to mental health challenges, rising family disputes, and increased vulnerability to scams, as desperate individuals may seek quick fixes to financial burdens. In the digital age, cybercriminals exploit this desperation, drawing victims into fraudulent investment schemes or illegal lending traps. Furthermore, high household indebtedness limits the government's ability to stimulate the economy during downturns. When too many citizens are financially fragile, even cash handouts or tax rebates are used to repay debts rather than revive economic activity. Left unchecked, household debt becomes not just a private burden but a public risk. The consequences: Why soaring household debt is dangerous If Malaysia's household debt remains unchecked, what risks emerge? • Financial Instability: A high overall debt load amplifies the risk of loan defaults during downturns or rate hikes. Stress-test results show high-DSR households are especially exposed during economic shocks. • Stagnating Upward Mobility: Heavily indebted families have less ability to save for education, healthcare, or retirement, threatening intergenerational mobility. • Growing Inequality: Debt-servicing requirements hit the less affluent hardest, as wealthier Malaysians benefit from lower interest rates and greater collateral. • Weaker Economic Recovery: With nearly RM1.63 trillion in total household debt in 2024, a large share of income flows to debt repayment, squeezing future consumption and potentially slowing national recovery from economic shocks. • Potential for Social Unrest: Persistent financial distress among large swathes of the population can accelerate social and political dissatisfaction. Responding to the crisis 1. Restore high-quality job growth Stimulate advanced manufacturing, green technology, and high-value services to generate better-paying, more stable jobs. Encourage policies supporting productivity and innovation rather than mere consumption. 2. Promote responsible credit practices Maintain and update lending standards; monitor DSRs rigorously, especially among new borrowers. Improve public awareness of the risks of excessive debt. 3. Strengthen social safety nets and financial literacy Expand targeted welfare and emergency savings supports, especially for high-DSR and low-income households. Continue nationwide financial education to help citizens plan better and understand the long-term costs of debt. 4. Data-Driven Policymaking Use micro-level borrower and sectoral data to tailor macroprudential measures, avoiding 'one size fits all' restrictions that can hurt lower-risk borrowers. Conclusion South-east Asia's, and especially Malaysia's, household debt predicament is not the result of individual irresponsibility alone. It is deeply tied to deindustrialisation, job precarity, and the easy availability of credit—amplified by evolving consumption norms. While prudent lending has insulated the overall financial system thus far, the proliferation of high-DSR borrowers is a warning sign. Bold, targeted action—from rebuilding the foundations of stable employment to stricter but nuanced credit oversight—is crucial to ensure Malaysia's development remains both inclusive and sustainable, rather than an illusion built on borrowed time. *This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
Yahoo
5 days ago
- Business
- Yahoo
Think the US Is Bad? People in These 9 Countries Have Way More Debt
In the U.S. it's more common than not to carry a boatload of debt. As of the third quarter of 2024, Americans owed $17.57 trillion in total debt — up 2.4% year over year, according to Experian data. Even spread over hundreds of millions of people, it's a lot of debt: $58,215.12 for the average household, according to a new study by QuickLoan Pte Ltd. Check Out: Read Next: But the U.S. isn't the only country with a serious debt issue among its citizens. The study analyzed household debt data across multiple countries to find which nations live most on credit and where debt-to-income ratios pose the greatest financial risks. The U.S. came in 10th, based on loan-to-income ratio, as it has a loan-to-income ratio of 112.21%. Below are the nine countries where the burden of household debt is even greater. 9. Netherlands Average household debt: $53,430.77 Average yearly net salary: $45,433.20 Loan-to-income ratio: 117.60% Learn More: 8. New Zealand Average household debt: $43,987.51 Average yearly net salary: $36,810.84 Loan-to-income ratio: 119.50% 7. Luxembourg Average household debt: $87,235.44 Average yearly net salary: $72,789.24 Loan-to-income ratio: 119.85% 6. Sweden Average household debt: $45,796.27 Average yearly net salary: $37,528.32 Loan-to-income ratio:122.03% 5. Denmark Average household debt: $59,926.00 Average yearly net salary: $47,495.64 Loan-to-income ratio: 126.17% 4. Switzerland Average household debt: $124,785.99 Average yearly net salary: $86,807.04 Loan-to-income ratio: 143.75% 3. Canada Average household debt: $54,572.63 Average yearly net salary: $34,609.56 Loan-to-income ratio: 157.68% 2. Australia Average household debt: $70,348.47 Average yearly net salary: $43,060.44 Loan-to-income ratio: 163.37% 1. Norway Average household debt: $74,629.74 Average yearly net salary: $43,955.28 Loan-to-income ratio: 169.79% More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard Clever Ways To Save Money That Actually Work in 2025 These Cars May Seem Expensive, but They Rarely Need Repairs This article originally appeared on Think the US Is Bad? People in These 9 Countries Have Way More Debt Sign in to access your portfolio
Daily Mail
16-07-2025
- Business
- Daily Mail
America's banks post earnings bonanza... but there's an invisible tax burning through your cash
American wallets are being hit from multiple sides — by rising prices, higher interest rates, and record levels of household debt. As inflation ticked back up to 2.7 percent this week, the highest since February, consumers keep swiping their cards and borrowing more just to stay afloat. Meanwhile, some of the nation's biggest banks are raking in massive profits, thanks in large part to that increasing inflation. JPMorgan, Citigroup, PNC, and Bank of America all posted stronger-than-expected earnings this week, citing gains in interest income. Bank of America led the charge with $7.1 billion in profit, fueled by a record $14.7 billion in net interest income and a 15 percent jump in trading revenue. Other major consumer lenders, like PNC and Citigroup, also posted billion-dollar profits on interest payments. Americans have been tapping and swiping their credit cards at an increasing clip to keep up with rising costs across dozens of industries. Those swipes often include high-level interest payments, and are generating billions for banks, even as everyday Americans fall deeper into debt. That mix has slapped an $18.2 trillion price tag on consumer debt in the US, with the average household owing more than $80,000 on their homes, credit cards, vehicles, and student loans. But banks are saying that Americans keep spending, despite the increased costs. 'Consumers remained resilient, with healthy spending and asset quality, and commercial borrower utilization rates rose,' the bank's top boss, Brian Moynihan, said. 'In addition, we saw good momentum in our markets businesses.' The Federal Reserve, which has kept interest rates above 4 percent to fight inflation, is partly to thank for the banks' earnings surge. When the Fed holds rates high, it pushes up the cost of borrowing across the economy — allowing banks to charge more on loans than they pay when customers service their debts. But the Fed has two main threads it is trying to hold together: the bank is responsible for taming inflation and maintaining monthly jobs numbers. Experts tell will likely keep the Central Banks lending rate higher becauseof yesterday's inflation reading. A spike in Wall Street trades also helped banks collect more money than expected At the same time, market volatility is fueling profits on Wall Street. Banks earn fees by helping large clients trade stocks, bonds, and currencies — and in a year marked by tariffs, war, and economic uncertainty, business is booming. JPMorgan and Citi also reported earnings growth driven by the same trends: bigger returns from customer loan payments and a strong quarter for their trading desks. Wall Street's trading floors at these banks have maintained a hot streak, as volatile markets triggered by tariffs, geopolitical conflicts, and economic uncertainty caused a surge in institutional trading. The banks — which collect fees for helping clients buy and sell stocks, bonds, currencies, and commodities — are seeing better-than-expected returns from their capital markets businesses. Goldman Sachs' profit jumped 22 percent in the second quarter, largely because of the market turbulence. There is one more economic pressure Americans might soon encounter: the decreasing strength of the dollar. The greenback just recorded its worst slide in value in 50 years against a raft of other currencies. The dollar's fall from grace is a result of Trump's erratic trade policies, concerns over spiraling government debt, and high interest rates. The dollar's position as the world's main currency allows the US to cover its growing debt by printing more money, but that can cause inflation. So ordinary Americans can end up paying the price: everyday items get more expensive and their dollars don't stretch as far.
Globe and Mail
17-06-2025
- Business
- Globe and Mail
Canada's household debt crisis: When and how we outpaced Britain and the U.S.
Canada's household debt-to-GDP ratio has remained at or above 100 per cent for a decade – currently the highest among the world's 10 largest economies. As of late 2024, Britain ranked second at 77 per cent, followed by the United States at 71 per cent. Here's a look at when and why Canada's household debt began to outpace that of its global peers. Debt in an economy typically falls into three categories: government, corporate and household. While Canada's government debt is significant, it remains lower as a percentage of GDP than in several other major economies. What sets Canada apart is the scale of its household debt, which increases the country's exposure to interest rate hikes and economic downturns. Of the roughly $3-trillion in Canadian household debt in the first quarter, nearly 75 per cent is tied to mortgages – underscoring the central role of housing unaffordability in the country's financial vulnerability. Between 2000 and 2010, Canada's household debt-to-GDP ratio was lower than those of both Britain and the U.S. But since 2011, it has surpassed both, and the gap has continued to widen. This shift mirrors the pattern discussed in my earlier Globe and Mail article, 'When exactly did Canadian housing become so unaffordable — and who's to blame?' A key divergence emerged in 2009, when the ratio of average home price to disposable income exceeded nine. Since 2015, that figure has remained above 10 — significantly higher than in Britain or the U.S. While correlation doesn't necessarily imply causation, the numbers clearly point to housing unaffordability as a major driver of household debt in Canada. Rising home prices have forced new buyers to take on larger mortgages, but the impact goes beyond that. Homeowners who saw gains in home equity were often refinanced or took out home equity lines of credit — further inflating debt levels. One major reason for Canada's divergence in housing affordability appears to be monetary policy after 2008. Like the U.S. Federal Reserve, the Bank of Canada cut interest rates to near zero. But unlike the U.S., Canada hadn't experienced a severe housing crash. As a result, prolonged ultralow rates spurred speculative demand, with buyers using cheap leverage to chase high returns on small down payments. While prolonged low rates may have initiated the divergence from Britain and the U.S., other factors such as restrictive zoning and rapid population growth helped sustain the housing unaffordability. Canada's household debt crisis is inseparable from its housing affordability problem — driven by prolonged low interest rates, limited supply owing to restrictive zoning, population growth and speculative investment. Housing unaffordability not only hurts the quality of life for younger generations, but also makes the Canadian economy more vulnerable to future economic shocks because of its tight link with household debt levels. Hanif Bayat, PhD, is the CEO and founder of a Canadian personal finance platform.
