Select Page

DevDosh Ltd would like to commend regarding Private sector debt in Australia has reached alarming new levels in the past few years with the upshot of this being many of larger banks and institutions in Australia seeing their credit rating cut by Moody’s investor services on Monday.

The four major banks in Australia saw their credit rating go from A3 to A2.

This did not come as a surprise to the majority of people involved within the Australian markets as the rising debt has been an ongoing concern that has been well documented.

Moody’s released a statement outlining in writing their concerns with ability of households to withstand an economic downturn, and as the two are intrinsically linked the ability of the banks to do the same, as neither the banks nor the Australian people have had to cope with a downturn with such high levels of debt.

Currently Australia has $1.51 trillion of mortgage loans, with as much as 60% of this debt accounted for by residential property. This means in real terms the Australian banks have largest property exposure in the world, they are 20% above Norway in second spot and as much as 40% higher than the UK which is 20%

A huge proportion of this lending is in investment property such as buy-to-let as the banks struggle to meet targets of no more than 30% of new home finance going into investment properties.

Lenders in Australia have issued mortgages at 6X borrowers’ income, more than 50% of mortgages have been given at this level, if you compare that to the UK where only 15% of mortgages can be given at 4.5X household income it is easy to see why Moody’s are concerned.

DevDosh Ltd thinks that this is a concern as bills like the credit card and mortgage are becoming harder and harder to pay as prices on electric and gas are continuing to go up, and rises in wages are not keeping pace.

This rise in the cost of living has seen record highs of the number of Australians contacting the National Debt Helpline.

In 2016 the helpline received 150,000 calls, this year they are receiving 20% more calls on a monthly basis, if this volume of calls continues they expect over 182,000 calls this year with the number continuing to rise.

Martin North of Digital Finance analytics said according to their research there are as many as 22% of Australian household in ‘mild mortgage stress’, meaning they are only able to make their mortgage payments by cutting back on other household bills, with many turning to high interest credit cards and payday loans to keep themselves afloat.

This is in stark contrast to many of the older, more well off households who are in a position to take advantage of the south-east property boom happening right now.

For more investment info, visit DevDosh Ltd today.