Low interest rates are steadily improving financial conditions for Australian households, according to the St.George-Melbourne Institute Household Financial Conditions Report, especially for mortgage holders.
The latest quarterly St.George-Melbourne Institute Household Financial Conditions Index reveals that mortgage holders have dropped debt by 5.9% over the past 12 months. In addition, for almost 75% of respondents, servicing debt is below 25% of after tax income, indicating most Australians are not over extending themselves.
St.George retail banking general manager, Andy Fell says that low interest rates are assisting homeowners to lower their debt quicker and get themselves into a better financial position.
“Australia’s love affair with the property market also shined through this quarter, with low interest rates directing households to real estate as a popular source of new savings,” he said.
“The findings show there was a 5.4 point lift over the quarter in savings directed to real estate, making it the second preference after bank deposits and perhaps signalling a trend in buying to invest, rather than to own.”
Home renovations have also hit a 10-year high, according to the report.
“We’re also seeing that Australians’ are continuing their trend to be a nation of renovators, with 41% indicating they are saving for home improvements and renovations, an increase of 7.6% since December. This was the highest proportion since at least 2005, when record began,” Fell said.
The chief economist for St.George Bank Besa Deda added that one of the biggest winners this quarter were renters, who enjoyed a big jump in financial conditions by 14.3%.
“The findings indicate that renters could be reaping the benefits of strong investor activity which is limiting growth in residential rents.
“Rental vacancy rates are creeping higher across most capital cities, suggesting renters are benefiting from a softening in rental conditions.”
