More Australian households are worrying about their levels of debt, particularly so among those holding mortgages,
ME Bank’s latest Household Financial Comfort Report shows.
The proportion of mortgage holders who ‘worried about their household’s level of debt over the last month’ rose to 51%. This proportion increased only to 27% for households with no mortgage and 23% for those who own their home outright, according to the ME survey conducted in December
Households in metropolitan Sydney (45%) and metropolitan Melbourne (43%) reported high levels of worry about their households’ level of debt over the last month. ME said this could be a reflection of higher house prices in these cities.
By household type, couples with young children (51%) reported the highest level of worry with debt.
Jeff Oughton, consulting economist for ME, warned that mortgage defaults may escalate if interest rates increase, particularly among low-income households that are already dealing with the rising cost of necessities.
About 32% of households expect to be ‘worse off’ financially if the
RBA raises the official cash rate by 1% from its record low of 1.5%, including 47% of those with a mortgage for the house they live in.
Meanwhile, more than half of households (56%) renting or paying off a mortgage reported they are spending more than 30% of their disposable household income on this cost – a common indicator of financial stress.
ME’s survey found 72% of renters spend 30% or more of their disposable income on rent and 46% of those paying off a mortgage put 30% or more of their disposable income towards this.
On a positive note, ME said actual non-performing loans on owner-occupied mortgages remain low, and households expect mortgage defaults to remain low. The bank attributes this to relatively low unemployment rates and loan rates.
Its survey found that only 7% of households surveyed reported they could not always pay their mortgage on time during the past year, and 7% said could not pay their rent on time.
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