Industry

What goes up, may need levelling

Summary

The latest estimates of household debt to disposable income have provided a benchmark for acute analysis within the local financial markets. According to Emma Haiyambo, Acting Director of the Department of Strategic Communications and Financial Sector Development at the Bank of Namibia, the ratio is calculated according to set standards.

“In the October 2012 Financial Stability Report, the Bank of Namibia estimated two measures of household indebtedness. The first is the household debt to disposable income ratio; and the second is the debt servicing ratio which measures the percentage of an individual’s disposable income that he or she uses to debt consisting of interest and principal.
The figures are based on an annual average, and are thus not illustrative of every person individually but it provides an understanding for analysts to estimate the overall level of indebtedness of private households. The calculations are based on figures from the National Budgets and Annual National Accounts, indicating that the figures are based on an End-of-Year calculation of income and debt.” The household indebtedness figure is but one estimate that portrays activity in the credit market as it incorporates one of the major credit accounts: mortgages. The last estimate shows that household debt stands at 89.6% with mortgage and instalment credit as the two major contributors.

The latest estimates of household debt to disposable income have provided a benchmark for acute analysis within the local financial markets. According to Emma Haiyambo, Acting Director of the Department of Strategic Communications and Financial Sector Development at the Bank of Namibia, the ratio is calculated according to set standards.

“In the October 2012 Financial Stability Report, the Bank of Namibia estimated two measures of household indebtedness. The first is the household debt to disposable income ratio; and the second is the debt servicing ratio which measures the percentage of an individual’s disposable income that he or she uses to debt consisting of interest and principal.
The figures are based on an annual average, and are thus not illustrative of every person individually but it provides an understanding for analysts to estimate the overall level of indebtedness of private households. The calculations are based on figures from the National Budgets and Annual National Accounts, indicating that the figures are based on an End-of-Year calculation of income and debt.” The household indebtedness figure is but one estimate that portrays activity in the credit market as it incorporates one of the major credit accounts: mortgages. The last estimate shows that household debt stands at 89.6% with mortgage and instalment credit as the two major contributors.