NEWS

Credit growth worries bankers

Greek households are increasingly indebted, according to the latest monthly data released by the Bank of Greece yesterday. The data, updated to May, shows that credit expansion to households has accelerated. By contrast, credit expansion to corporations has slowed down. Outstanding loans to households at the end of May were worth 44.5 billion euros, or 27.5 percent of the country’s gross domestic product (GDP). Credit growth on credit cards has slowed down slightly, to 22.9 percent from 23.5 percent last May,but personal loans have risen 61.9 percent. Bankers explain this growth by saying that people are taking out personal loans to pay off their credit card debt. While household indebtedness is still low by EU standards, its steep rise is a cause of concern to the Bank of Greece and commercial banks, which believe that the number of defaults on loans may accelerate. Bankers also point out that 70 percent of housing loans are taken with floating interest rates, thus becoming vulnerable to any rise in rates. Housing loans continue to grow at a 25 percent rate, but house prices in Athens have started decreasing. They dropped 2.6 percent year-on-year in April, versus a 16.2 percent increase last year. While some analysts point this as a sign the market is taking a downturn and predict a further drop in the winter, there is also evidence to the contrary. Investment in housing is declining and this will lead to a reduced supply of new housing.