Aussies load up on debt

A DEBT binge by households is putting people in dangerous financial positions and leaving them unprepared for future interest rate rises.

Despite falling interest rates making it easier to pay down loans, Australian households now owe almost $1.6 trillion, a 28 per cent rise in just five years, and economists say personal borrowing levels are among the world’s highest.

The latest Reserve Bank figures show housing debt is the biggest factor.

Meanwhile, people are paying high interest rates – averaging 17 per cent – on almost $33 billion of credit card debt that fails to get repaid every month.

Prushka Fast Debt Recovery chief executive Roger Mendelson said Australians had not factored in the costs to repay their debts when rates eventually climbed.

“I certainly think there’s going to be an issue when interest rates go up, and anyone who says they won’t is denying the normal economic cycles,’’ he said. “If you lose your job, interest rates go up, unemployment goes up, house prices go down, that’s when people get caught out.”

Oracle Lending Solutions director Angelo Benedetti said his firm was turning away people every month because they wanted to overstretch themselves with debt.

He said he had received a lot of inquiries about personal loans “but unfortunately for a lot of people it’s about debt consolidation”, combining several out-of-control credit cards into one lower-interest loan.

“Debt reduction should be the No. 1 thing at the moment,” he said.