There has been a lot of talk about the high household financial stress in Australia but the truth is, it has not manifested in any significant increase in mortgagee defaults, which remain low despite investment loans experiencing higher interest rates.
According to the RBA, gross household debt has risen while net household debt to income ratios have eased in the last 10 years when record-high currency and deposits are taken into account. It reveals that personal credit growth has fallen sharply recently as well.
RBA’s statistical tables also show that the average credit card balance accruing interest has actually fallen 21% since 2012 and credit card limits being used have fallen below the average over the last 15 years.
Meanwhile, the ABS released its Lending Finance report in May 2017, revealing that personal borrowing is down despite there being an increase in lending for home renovations. Non-housing loan commitments have dropped sharply to their lowest level in the past 15 years.
If households were really in financial stress, refinancing and debt consolidation should trend upwards. However, an analysis from Commsec shows that these segments are tracking at the lowest level since the century began.
What could this mean? High gross household debt may not be an indication of financial stress and may suggest a good conservative approach to reducing other forms of debt.
For more information about property and investment in Australia, contact a Specialist to discuss your particular circumstances.
Chan & Naylor Group has national offices in Brisbane and Capalaba in Queensland, Melbourne and Moonee Ponds in Victoria, East Perth in Western Australia, and Bankstown, Parramatta, Pymble, North Sydney, and Sydney in New South Wales that can assist you with managing your household finances.