Thursday, August 10, 2006

More Debt, More Repayments Due

Apparently we went on a home-loan spending spreee in June, weeks after the Reserve Bank lifted interest rates in May.

Collectively we now owe more than A$20 BILLION on home loans.

Repayments, JUST of the home loan debt account for 11% of weekly earnings, on average!

The trouble with averages is, they don't tell us enough. Not everyone has a home loan. Some people have two incomes, some do not. Nevertheless this 11% is a higher proportion of our earnings than when interst rates were at 17%. So even though our incomes have risen and interest rates are at about 7.5%, we are now payong more of our income, just to service home loan debt.

I think the Reserve Bank will left rates again, perhaps in October or November. More pain is due, because collectively, we won't stop borrowing to excess.

The Analyst