Household credit growth lifted slightly to 2.9% y/y from 2.8% y/y previously whilst corporate credit growth eased to 9.0% y/y from a prior 10.1% y/y.


Within the corporate credit category, growth in general loans and advances, which comprise nearly 50% of total corporate credit, moderated to 10.3% y/y from 13.2% y/y in May. Mortgage advances which is the other sizeable (22%) component of corporate credit, eased to 7.6% y/y in June from a prior 8.2% y/y and from double digit growth in 2016. This has been linked to a slowdown in commercial property development. 


Within the household credit category, growth in mortgage advances, which makes up 60% of household credit, remained pedestrian in the vicinity of the 3.0% y/y mark, whilst unsecured credit growth eased to 4.2% y/y from 4.6% y/y. Month to month unsecured credit extension contracted in May and June, with the annual outcome lifted by low base factors which in turn relate to a technical correction to the data in April 2016.


Household instalment credit and leasing finance, which represent vehicle financing, remained flat in June after contracting the past year. As such passenger vehicle sales are likely to remain weak.


Rates of credit extended to households have been affected by supply and demand side considerations. On the supply side, survey evidence shows a renewed tightening in credit criteria applied to households (see figure 3).


Demand side factors include depressed consumer confidence, high unemployment, weak income growth and deleveraging. In view of the recent interest rate reduction, and possibility for a further cut, households may take advantage of the lower interest rate environment to reduce levels of indebtedness. This has already been taking place as evidenced by the decline in the household debt to disposable income ratio, to 73.2% in Q1.17 from levels closer to 80% in 2013 (see figure 4).


Despite the decline, the ratio is still historically elevated and according to the National Credit Regulator, over half of credit active consumers are struggling to service debt timeously.

Subdued household credit growth is expected to be a key restraining factor on household consumption expenditure which is forecast at a relatively weak 1.0% y/y in 2017 versus 0.8% y/y in 2016. Consequently, meaningful demand led inflationary pressures should remain absent.