Irish household debt (defined as outstanding borrowings from financial institutions) peaked in late 2008 at €204bn and has been falling since, declining to just under €150bn in the fourth quarter of 2015, according to the Central Bank, the lowest in a decade. The debt burden (debt relative to household disposable income) has also declined significantly, to 155% from a peak of 215%, although still leaving the Irish ratio well above the euro area average ( which is under 100%) and the third highest in the European Union.
No one can be certain at what point the deleveraging will stop but one factor which may impact is that Household wealth continues to recover, with the result that Household net worth has risen from a cycle low of €440bn to €626bn, the highest since early 2009. The upturn in wealth was initially driven by rising equity markets ( boosting pension fund reserves) but over the last few years the recovery in residential property prices has been the made driver. Indeed, financial wealth actually fell in the latter half of 2015 but was offset by further housing gains.
Last year also saw a substantial rise in the (gross) Household saving ratio, to 9.5% from 5% in 2014. On the face of it then, Irish households are rebuilding savings, despite the meagre returns on deposits, and regardless of a significant improvement in their financial position, at least in the aggregate, are still more comfortable repaying debt rather than borrowing.