Drivers and implications of the strong growth in consumption loans

News, Staff memo Over the last year, the growth rate of consumption loans has increased sharply, from less than 3 per cent per year in mid-2016 to above 8 per cent in recent months. This development may increase the vulnerability of households to disturbances in their economic situation, as consumption loans have high interest rates, writes the author of a new Staff Memo.

Consumption loans are a small but growing share of household debt. This staff memo shows that consumption loans are mostly extended by the major banks and by specialised consumer credit banks, whose core business is to grant loans without collateral. Consumer credit banks contributed 73 per cent of the growth in consumption loans between June 2016 and June 2017. Technological changes in payments, shopping and banking all contribute to the ease of access to unsecured loans through online platforms, where consumer credit banks are active, and the possibility of paying with credit. Another driver of the growth rate of consumption loans might be borrowers seeking to circumvent macroprudential policies concerning mortgage loans, such as the loan-to-value limit and the amortisation requirement.

It is important to monitor how consumption loans develop going forward, as structural transformations in payment, shopping and banking are likely to continue, and macroprudential policy is likely to stay in place, concludes the author.

The Staff Memo was written by Peter van Santen at the Financial Stability Department of the Riksbank.

About Staff Memos

In Staff Memos, Riksbank employees can publish longer analyses in their own names. The opinions expressed in Staff Memos are those of the authors and are not to be seen as the Riksbank's standpoint.

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Updated 15/01/2018