AS A proportion of GDP, credit in Brazil has doubled in ten years. Boosted by easier access to mortgages, property prices in the big cities have more than doubled in just five. The car industry, similarly buoyed by availability of financing, posted its fifth successive year of record sales in 2011. Now the country’s credit boom (see chart) has started to look less fizzy and more frightening. At 6%, the share of loans more than 90 days overdue has hit a record high. Rather than taking away the punchbowl, the government is urging second servings all around. In 2009, when the global recession dampened Brazilian consumers’ spirits, policymakers lowered sales taxes and interest rates to revive demand. With the economy faltering again—it grew by just 2.7% last year and independent analysts expect even less in 2012—the government wants borrowers to ride to the rescue once more. On July 11th the Central Bank’s policy interest rate was chopped by half a percentage point to 8%, down from a peak of 12.5% last August; further cuts are expected. It has ordered public banks to trim their interest margins and lend more, and urged private ones to follow suit. Lower rates will quickly help to take the pressure off overstretched consumers, says David Beker of Bank of America. Loan tenors are much shorter in Brazil than in most other places, meaning few borrowers will be stuck with the old, higher rates for long. Currently, more than a third of household-loan repayments is eaten up by interest.

But the government’s hope that Brazilians will recycle their freed-up cash into fresh spending and new loans is less well-founded. Ceres Lisboa of Moody’s, a ratings agency, is doubtful that private banks will play along. Rising default rates and increased bad-loan provisions have squeezed profits, and bankers are determined to be more careful about who they lend to in future. That means public banks may gain market share—perhaps at the cost of declining credit quality, if private ones get rid of their less profitable customers.

A fizzling of the credit boom is not cause for panic. Although private debt has grown in recent years at a rate that cannot be sustained, a very low starting-point means that the absolute level remains quite modest. The stock of mortgage lending has quadrupled since 2005, for example, but it is still little more than 5% of GDP. Brazilian banks are also well-capitalised, the consequence of strict regulation introduced after previous banking crises. Neil Shearing of Capital Economics, a consultancy, estimates that every Brazilian mortgage would have to fall into default and the value of all collateral become worthless for banks’ average Tier-1 capital ratio to fall below the 6% minimum stipulated in the Basel 3 accord.

As long as the labour market stays strong, most of the Brazilians who have binged on credit should be able to digest their borrowings relatively painlessly. Unemployment is close to a record low and real incomes are still rising, though more slowly than before. Most banks, too, should be able to move smoothly to a more sustainable level of credit origination. A few midsized niche lenders will struggle: at Banco Votorantim, for example, soaring provisions against bad auto loans meant that shareholders had to inject 2 billion reais ($970m) last month. Some banks could be taken over. But with neither lenders nor borrowers keen to take on much new credit, the biggest effect of Brazil’s decade-long credit binge will be a hangover in the real economy.