The Reserve Bank cut interest rates to a fresh all-time low of 1.5% in August. And even though many of Australia’s home loan lenders held back part of that 0.25% cut, variable rates are still at all-time lows themselves.
Despite that, it seems that half of those households who have mortgages on their properties in New South Wales are worried about making repayments.
That’s the finding of a survey of 1000 people by Galaxy Research on behalf of Fox Symes, the debt solutions provider, and reported in Domain over the weekend.
Given the record level of debt now being carried by Australian households, no doubt led by the need to borrow ever greater amounts to get a foothold in Sydney’s property market, the survey found that “one in five were worried they’d never pay off their mortgage entirely, and 20 per cent were concerned about rising rates”.
Concerns about debt, and the ability to repay it can have profound implications for economic activity, consumption and growth in the economy. It can also threaten government assumptions that domestic demand will be supported by a willingness of Australian households to further run down their savings in favour of spending.
Fox Symes’ director Deborah Southon said that even with super low rates, “people are really struggling with mortgage repayments, which is compounded by wage stagnation and rising everyday costs for things like food and utilities”.
The release of second quarter GDP this Wednesday will be an interesting data point from which to judge the strength of domestic demand, and the savings rate, given this backdrop.
But what is clear is that the ever-increasing debt load Australians are taking on will at some point put a handbrake on growth.
The question is whether the nation has reached that point already.
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