Trends in Consumer Credit Market in Post-Transition European Countries – Is the Life Cycle of Saving and Borrowing Relevant?

This paper attempts to compare the trends of borrowing in post-transition countries in the larger perspective of financial decisions taken by a household over the life time. It uses the classical permanent income and life cycle hypotheses, but admits irrationality of decisions taken by households. Using different types of data (macro and microeconomic) it concludes that the behaviour of households in post-transition countries significantly departs from those hypotheses, generally relevant for the households of more developed countries. In particular, saving in post-transition countries is rare and only for a part of households motivated by gathering resources for retirement. Mortgage borrowing pattern departs from this foreseen by life cycle hypothesis, while non-mortgage borrowing is more frequent and was rising more quickly than in more developed European countries. Among underpinnings may be indicated relative poverty of post-transition countries, but also lower financial awareness and lack of precautionary culture of older generation and of less educated people, in particular from more remote areas.