June 2016 issue contents
The distribution of debt across euro-area countries: the role of individual characteristics, institutions, and credit conditions

by Olympia Bover,a Jose Maria Casado,a Sonia Costa,b Philip Du Caju,c Yvonne McCarthy,d Eva Sierminska,e Panagiota Tzamourani,f Ernesto Villanuevaa and Tibor Zavadilg


The aim of this paper is twofold. First, we present an up-to-date assessment of the differences across euro-area countries in the distributions of various measures of debt conditional on household characteristics. We consider three different outcomes: the probability of holding secured debt, the amount of secured debt held, and the interest rate paid on the main mortgage. Second, we examine the role of legal and economic institutions in accounting for these differences. We use data from the first wave of a new survey of household finances, the Household Finance and Consumption Survey. Adjusting for household composition, we find substantial cross-country variation in secured debt outcomes and in their distribution across age and income groups. Among all the institutions considered, the length of asset repossession periods best accounts for the differences across countries in the distribution of secured debt. In countries with longer repossession periods, the fraction of people who borrow is smaller, the youngest group of households borrow lower amounts (conditional on borrowing), and the mortgage interest rates paid by low-income households are higher. Regulatory loan-to-value ratios, the taxation of mortgages, and the prevalence of fixed-rate mortgages deliver less robust results.

JEL Codes: D14, G21, G28, K35.

Full article (PDF, 58 pages, 2160 kb)

a Banco de EspaƱa 
b Banco de Portugal 
c National Bank of Belgium 
d Central Bank of Ireland 
e CEPS/INSTEAD Research Institute 
f Deutsche Bundesbank 
g National Bank of Slovakia