Improvement in consumer debt levels in fourth quarter

LAST year’s fourth quarter saw the best improvement of the year for South Africa’s consumer debt stress levels.

According to the Experian Consumer Default Index (CDI), consumer debt stress levels improved the most among middle-aged families during the last three months of 2017.

The index also showed that debt repayments for different loan types performed well, with vehicle loans the only exception, reflecting a marked deterioration.

The Experian CDI measures the rate of first-time credit defaults of 14.2 million consumers with 17.9m active credit cards, and personal, vehicle and home loans.

The index was 3.15% in the fourth quarter of last year, an improvement on the 3.38% over the same reporting period in 2016. The total value of outstanding firsttime defaulting credit accounts amounted to R11.95 billion.

Simon Russel, the managing director of Experian SA, said that, in the months leading to the final quarter of last year, the index was overlayed with Mosaic, a consumer lifestyle segmentation system.

Mosaic classifies the population into 36 types and nine overarching groups, providing a 360-degree view of consumers’ choices, preferences and habits.

It singled out two consumer groups that registered notable movement when it comes to repaying their loans.

Russel said “Hard Working Money” had the most debt outstanding and recorded an improvement of 2.64% in December last year, compared with 2.91% in December 2016. This group comprises middle-aged, educated families with an annual income of more than R150 000 and who tend to live in suburbs around industrial and mining areas.

He said the other notable movement on the index was the group called “Penniless Grant Transients”, which is made up of young, single individuals or co-habiting couples who rely on social grants and live in one- or two-roomed informal dwellings. They are educated beyond Grade 12 and have an annual household of less than R76 400. This group showed a year-onyear improvement of 4.89% in December last year, compared with 6.54% in December 2016.

Russel said although debt repayments across home, credit and personal loans improved, the Vehicle Loan Index tracked higher at 3.11% in December last year, compared with 2.71% in December 2016.

“Accelerated growth in vehicle sales in the last three months of 2017 was a positive sign of improved consumer confidence. However, the corresponding increase in first-time vehicle credit defaults, which performed worse than average, for these sales is concerning. This suggests that vehicle loans are becoming a riskier product,” said Russel.

He added that although consumers benefited from the stronger rand, low interest rates and better disposable income, the approach to handling finances differed among groups, with some taking the conservative route, whereas others continued to struggle with their debt.