Household indebtedness down, default rates still alarming
The level of indebtedness among Brazilian families fell in August for the second month running, but the percentage of people with debts overdue and those saying they will not be able to pay off their arrears was on the rise. The figures can be found in a survey by the National Confederation of Trade in Goods, Services, and Tourism (CNC), out Tuesday (Sep. 5).
The indebtedness index fell from 78.1 to 77.4 percent, the lowest since June 2022. In the last 12 months, the reduction stood at 1.6 percentage points.
Anyone with outstanding bills is considered to be in debt, not just those who have debts overdue. The data show that credit cards are the top villain in the budget of Brazilian households. The proportion of consumers facing credit card debt is 85.5 percent.
The study also reveals that the average time in debt is 6.9 months. The average time spent in arrears, in turn, is 63 days. The share of income committed to debt is reported at 29.9 percent.
According to Izis Ferreira, the economist responsible for the survey, two factors have contributed to this reduction: “a more benign context of lower inflation compared to last year and a resilient job market, absorbing people with lower levels of education.” “These have led people to have some slack in their budgets,” she went on to say, “and fewer of them are looking for credit as a means of consuming goods and services.”
Overdue bills
While the proportion of indebted people has declined, the percentage of defaulters (people with bills overdue), has grown, reaching 30 percent in August, equaling the result for December 2022.
“We’re talking about a consumer who has two or three credit cards and a personal or payroll loan or mortgage, for instance. With more types of debt, it’s difficult for this consumer type to pay them all off on time,” the economist pointed out.
Another worrying factor in the survey is the level of consumers who say they will not be able to pay their overdue bills, thus remaining in default. The 12.7 percent level is the highest in the time series that began in January 2010. This situation mainly affects people with incomes of up to three minimum wages.
