The share of household income being used to pay interest on debt has fallen to the lowest level in 35 years, freeing up tens of billions of dollars a year to be spent in other ways.
That compares to nearly 9 per cent in mid-2019 and more than 13 per cent in 2008. Household interest payments as a proportion of disposable income are at their lowest mark since the mid-1980s. Many borrowers have used savings from lower interest payments to reduce debt. The Reserve Bank says “substantial payments” were made into mortgage offset and redraw accounts between March and December last year. This amounted to about $40 billion, or 4 per cent of all disposable income.
There were concerns at the onset of the coronavirus crisis that rising unemployment would put many home borrowers under financial stress. Banks announced six-month loan payment deferrals in March 2020 for those affected by the pandemic. The Reserve Banks says the share of mortgage holders with a repayment deferral arrangement in place had declined to 2 per cent at the end of December, down from a peak of 8 per cent at the end of June.
MattWadeSMH This Australian is spending very little on non-essentials and simply reducing debt.
MattWadeSMH Interest payments are at all time lows whilst PRINCIPAL balances are at all time highs. These mortgages will never be paid off; low rates just encourage more borrowing. It does show how much money could be spent on other things if APRA/RBA actually ran a macro-prudential policy.
MattWadeSMH Families aren’t spending they are saving what they can They are worried the financial cliff is coming