RBA concerned by rising household debt

AAP and Dow Jones Newswires 12 Aug

A senior Reserve Bank official has highlighted concerns about rising household debt in an indication interest rates may not be cut from current record lows.

RBA deputy governor Philip Lowe said borrowing has increased as house and land prices are driven higher by a rapidly growing population and limited housing supply.

Pay off your mortgage in your sleep - #2

So, have you filled out your Personal Financial Position Review? If you haven't—stop and go and do that now.

Like and journey, you need to work out exactly where things are right now and where you're headed. Rather than simply wandering aimlessly though life, you are at the crossroads—the tipping point—and are committed to doing things differently this time.

Pay off your mortgage in your sleep - #1

Getting rid of your mortgage is a function of four things:

  • Income
  • Cashflow
  • Structure, and
  • Focus

The same is true for any debt. Seems obvious but if you don't or can't get in front of it, then you have a challenge. And for many people that first step seems insurmountable, unimaginable.

The good news is that most people have ample space to manage it—it just doesn't seem like it. And everything just gets lost in the detritus of life.

How much money can I borrow?

The question asked most often about mortgages or home loans, is "How much money can I borrow?". There are many answers to that question, but the reality is only one is correct.

There are two critical 'affordability' calculations that are similar with any lender. One is Loan to Valuation Ratio or LVR, the other is Debt Serviceability Ratio [or a range of other similar terms] or DSR.