Australia’s household debt to income ratio is currently at 190% which is among the highest in the world. This number is a far cry from the debt to income ratio from nearly 30 years ago which stood at around 56%. The rapid increase of household debts can be attributed to a rise in mortgage debt which has been brought on by Australian’s looking to purchase their own home or investment property. Other reasons as to why we have seen a sharp increase in the debt to income ratio is that over the last decade we have been given easier access to credit, built a reliance on credit cards and experienced lower mortgage interest rates.
Facts About Australia’s Debt to Income Crisis
The recent property market boom has resulted in many Australians borrowing higher amounts with wage growth not keeping up with rising housing and living costs.
- Lower interest rates have been a key factor in growing debt. When credit is offered at a lower rate, borrowers want more of it.
- Whilst some developed countries have seen a decrease of debt to income ratios since the Global Financial Crisis, Australia’s debt levels have increased to record levels.
- The Reserve Bank of Australia is carefully monitoring the levels of residential lending, and the risks associated with high household debt. Further cash rate cuts may be required as the outlook for household consumption has slowed.
Managing Your Debt
If you are having difficulties managing your debt, here’s a few tips to keep in mind:
- If you have multiple credit cards and other personal loans, you should consider consolidating your debts into one loan account. If you have equity in your home, you could consider refinancing the debts at a reduced interest rate.
- Create a budget and have the discipline to stick to it.
- Set up a savings account and try to contribute any surplus from your budget for upcoming expenses. This may assist you to avoid using a credit card or drawing down on other loans to cover expenses.
- Resist the urge to splurge on credit cards!
Please contact us today for a confidential, cost and obligation free discussion about your lending needs. We would also be happy for you to refer your family or friends so we can assist them in creating a cost-effective home loan which suits their needs.