Debts of Cyprus Households: Lessons from the First Cyprus Survey of Consumer Finances

This paper describes participation of Cyprus households in various debts using data from the first (1999) Cyprus Survey of Consumer Finances. It complements our previous paper that described household participation in various types of assets (Haliassos et al., 2001). Debts considered encompass personal unsecured loans, including credit card debt, and loans secured by housing collateral, mainly mortgage debt. Findings are of policy interest, as they show the extent of household participation in various loans, and the indebtedness of various demographic groups. We document considerable popularity of credit cards as borrowing instruments despite their recent introduction, and a continuing parallel presence of antiquated forms of borrowing (informal store credits). There is surprisingly limited use by the young of mortgages, despite very high homeownership rates, and of car loans, despite high car ownership rates. We find evidence of considerable reliance on family transfers for the financing of education, home acquisition, and car purchase by the young. Particularly problematic for equality of opportunities is the limited ability of the young to take student loans and the reliance on their parents to do so in order to finance their post-secondary education. Finally, we have noted a tendency of Cyprus business owners to take out large loans from their business for personal use.