A continuation in present trends of borrowing by Greek households could have negative repercussions on the economy and the financial health of banks, the Bank of Greece has warned. «Although Greek households are not over-indebted by present figures, if present trends continue for a number of years, it could bring about an excessive increase in their obligations. Such a possibility would create problems in the servicing of loans and would therefore have a negative impact on consumer spending and economic activity,» Bank of Greece Governor Lucas Papademos said in his annual report to shareholders, released on Monday. The report notes that credit facilities have expanded considerably in recent years and will remain more favorable than before the country’s accession to the eurozone, although not necessarily more favorable than today. According to central bank data, mortgages rose by 1,493 billion drachmas (4,381 million euros), or 38.9 percent in 2001, after a 913-billion-drachma (2,679 million euros), or 31.2-percent, increase in 2000. Besides low interest rates and flexible repayment terms, the increase in mortgages is also linked to rising real estate prices, which increased by 11-15 percent in 2001. Consumer loans shot up by 798 billion drachmas (2,340 million euros), or 42.5 percent in 2001, against 562 billion drachmas (1,649 million euros), or 42.7 percent in 2000. Credit card borrowing is rising even faster; the increase came to 489 billion drachmas (1,435 million euros), or 62.7 percent last year, against 260 billion drachmas (763 million euros), or 49.8 percent in 2000. Despite a still low ratio of total household debt to gross domestic product (18 percent, against an approximate 50-percent average for the eurozone), the central bank warns «there may be a problem as regards the distribution of credit and possible excessive debt on the part of particular households. Control of their total debt burden is not facilitated to the desirable degree.» The central bank stresses that the size of provisions for losses from bad loans is of major importance to bank portfolios. «It is necessary for credit institutions to exercise particular care in order to prevent a deterioration in the quality of the portfolio of loans of this category,» says the report. Loans are increasing faster than deposits, and represented 46 percent of bank assets at the end of 2001, from 39 percent in 1998.