Half of OECD countries household debts are greater than their income 

9th February 2022

New research by Compare the Market has revealed that more than half of the OECD countries surveyed have household debts greater than their annual net disposable income.

The research showed that Nordic countries take out the top two places with Denmark and Norway have the two highest household debt to disposable income ratio respectively.

Russia, Latvia and Hungary have the lowest household debt of the 35 countries studied.

Owing more money than you earn is accepted in more than half of OECD countries, where people are desperate to fulfil homeownership dreams.

The report analysed data from 35 OECD (Organisation for Economic Co-operation and Development) nations and found 19 had greater household debt than net disposable income.

Denmark found itself right at the top with a whopping household debt of 256.67 per cent in relation to its net annual disposable income.

In monetary terms, the average 2-person Dane household has debt equivalent to around US$265,946, in comparison to a net annual income of US$103,614.

Norway followed its Nordic neighbour with a household debt of 246.96 per cent, which realises to a debt of around US$300,184 compared to an average disposable income of US$121,552.

The Netherlands rounded out the top three by holding household debt of 235.66 per cent, in relation to its net disposable income.

According to the OECD, the stark disparity between debt and income is a direct result of rising property prices in recent years, especially in expensive cities, where the rise of household debts had historically been relative to rising in household income.

This trend is expected to continue with OECD data showing that the real house price index across OECD countries has skyrocketed through the pandemic with no signs of slowing down.

Compare the Market’s Digital Banking expert David Ruddiman, said “It’s almost a self-fulfilling prophecy. People who are looking to break into the housing market are trying to buy houses before the prices become unattainable. The case might often be that they will pay much more than they were planning just to secure a place, which only further inflates the housing prices.”

Household debt was much lower in Eastern European countries including Russia, Latvia, Hungary, and Lithuania where between 81.6 per cent and 89.9 per cent of the population owned their home outright in 2018.

In comparison, Denmark, Norway and the Netherlands only had outright homeownership numbers between 60.5 per cent and 81.3 per cent in the same year.

Russia had the least amount of household debt at just 33.78 per cent, followed by Latvia (40.52 per cent) and Hungary (41.49 per cent).

Countries with the most household debt

Rank

Country

Net annual income per 2-person household (US$)

Debt per net household income

Calculated average annual household debt (US$)

1

Denmark

103,614

256.67%

265,946.054

2

Norway

121,552

246.96%

300,184.819

3

Netherlands

87,556

235.66%

206,334.469

Countries with the lowest household debt

Rank

Country

Net annual income per 2-person household (US$)

Debt per net household income

Calculated average annual household debt (US$)

1

Russia

17,164

33.78%

5,791.919

2

Latvia

27,548

40.52%

11,162.45

3

Hungary

27,164

41.49%

11,270.344