The Reserve Bank of Australia (RBA) on Friday released household debt statistics for the June quarter, which revealed that aggregate mortgage debt hit an all-time high 144.1% of aggregate household disposable, with total household debt also rising to a record high 187.5% of disposable income:With interest rate rising by 0.25% in May and a further 0.5% in June, the share of household income going towards mortgage and household debt has risen to 4.7% and 5.5% respectively, whereas total principal and interest debt repayments (calculated by the Bank for International Settlements to March 2022) has also lifted to 13.4%:The above data obviously lags well behind the RBA’s rate. The mortgage and household debt data from the RBA is only current to the June quarter when the official cash rate (OCR) was 0.85%, whereas the BIS’ principal and interest debt repayments data is only current to the March quarter when the OCR was a record low 0.1% and Australia’s discount variable mortgage rate was a record low 3.45%. Since then, the RBA has lifted the OCR to 2.35%, in turn driving the average discount variable mortgage rate to 5.70%. However, Australian households’ world-leading debt loads, combined with their high exposure to variable mortgage rates, leaves them and the broader economy badly exposed. For these two reasons, Australian households will be hit much harder than other nations from the global rise in interest rates.

Source: New Zealand Herald October 03, 2022 23:16 UTC