Brazilian families are more in debt and pay more to take out credit, which has reduced their willingness to take out new loans. Data released by the Central Bank shows that family debt has reached 49.3% of annual income, while monthly debt commitment has reached 29.4%. At the same time, interest on free credit for individuals reached 59.4% per year, one of the main factors behind the loss of credit dynamism in the country.
The current level is the highest since the start of the series presented by the Central Bank, which begins in December 2022. That month, household debt amounted to 49% of income, a level close to that observed currently. Since then, the indicator has fluctuated, but has increased again in recent months, reaching 49.3%, the highest value in the period covered by the table published by British Columbia.
In practice, this means that almost half of families’ annual income is debts such as financing, loans and credit card usage. Despite these budget cuts, the total volume of credits granted to families has continued to grow.
In November, the so-called expanded credit for individuals totaled 4.7 trillion reais, the equivalent of 37.2% of gross domestic product (GDP). This progress indicates that many families still resort to credit, either to maintain their consumption or to reorganize their old debts, even in the face of more expensive conditions.
The problem is that this growth is losing intensity. The total credit stock of the national financial system increased by 9.5% in 12 months, a slower pace than previously observed (10.2%). This slowdown shows that consumers and businesses are more cautious when making new financial commitments.
Among companies, the movement is even more contained. Credit extended to businesses reached 6.8 trillion reais, or 53.8% of GDP, but barely increased during the month. In 12 months, the increase was 4.8%, driven mainly by the issuance of debt securities, suggesting that many companies looked for alternatives to traditional bank credit.
The reduction in the appetite for credit becomes clear when we look at concessions, which represent new loans actually contracted. In November, these operations totaled 637.5 billion reais, a decrease of 6.6% compared to the previous month. Even after statistical adjustments, transactions with families and businesses declined, reflecting a decline in demand for new credit.
The main obstacle to this movement is the high cost of loans. The average interest rate on new operations was 31.9% per year. For families, the average was even higher, at 37.0% per year. In free credit – which includes types such as personal credit and credit cards – interest has reached 59.4% per year, with increases particularly in non-payroll and installment credit cards.
Despite a more difficult scenario, default rates have remained relatively stable in the short term. Late payments of more than 90 days accounted for 3.8% of the total loan portfolio, although they increased from a year earlier. For families benefiting from credit with free resources, default rates rose to 6.3%, reflecting the financial pressure placed on consumers.
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