The latest mortgage figures tell a dark tale of Australian homeowners being among the world's most indebted with more than $1 trillion in borrowings.
While the Reserve Bank of Australia (RBA) does keep a close eye on the health of the economy, the warning signs of unstable financial times are reinforced by rising mortgage arrears, lenders' bad debt provisions increasing, and personal insolvencies jumping to near record levels.
Financial counselling services around the country are seeing greater demand for advice and help than ever before, with Chief Executive Officer of Financial Counselling Australia, Fiona Guthrie, suggesting her company’s services couldn't meet the latest demands.
The increase in recent calls has been largely from people suffering mortgage stress. "There are more people who have got mortgages that they can't afford to pay," said Ms Guthrie.
Commonwealth Bank economist Gareth Aird believes the RBA will take a conservative approach to lifting rates in the near future and doesn’t believe we will see any lift in 2017. "There's so much household debt that a couple of rate hikes here would completely knock the wind out of the housing market, and a lot of people would be impacted by it," said Gareth.
In a January 2017 report, Citigroup banking analyst Craig Williams stated, "Pockets of stress appear manageable in 2017 given the prevailing low interest rate environment" – reinforcing Gareth Aird’s claims.
What do you think? Are Australians with little liquidity, taking out too much debt? When rates do rise (and they will), are many Australians in for a rude shock? Do we need tougher lending laws to ensure that homeowners always own a significant portion of any house purchase?
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