Nearly 3 out of 4 households indebted: CoreLogic

The Survey of Income and Housing and the Household Expenditure Survey, which look at household income expenditure, include household debt and over-indebtedness, which determine a household to be indebted if their current debt is either at least three times their income or 75 per cent and over of the value of their assets.

“On these measures, the ABS considers 21.6 per cent of households to be over-indebted, 51.9 per cent of households to be not over-indebted and 26.4 per cent of households [that] have no debt,” Mr Kusher said.

Lower income households have been determined as the least likely to be indebted, while the higher income households are most likely.

“Lower income households are more likely to be debt-free compared to higher income households, which is reflective of many lower income households having paid off their debt,” Mr Kusher explained.

“The data shows that 94.6 per cent of households, which are either not over-indebted (37.8 per cent) or without debt (56.8 per cent), have no persons in the labour force which is reflective of retirees or people that are in a position to choose not to work.”

Further, 47 per cent of households with mortgages are over-indebted, compared to those who rent at 9.1 per cent, or own outright at 3.5 per cent.

Single family households with a couple and dependent children are the least likely to be living debt-free at 10.7 per cent, while lone person households are likely to be living debt-free at 45.9 per cent.

Group households are also found as one of the demographics least likely to be over-indebted at 16.2 per cent and least likely to have no debt at 20.8 per cent, to which Mr Kusher explains: “This probably reflects the fact that university students and young professionals are most likely to live in group households while studying and prior to purchasing their own home”.

Over-indebted households are found to spend 24.2 per cent of all goods and services expenditure on housing costs, compared to non-over-indebted households spending 16.8 per cent. Over-indebted households also spend more than twice as much each week on mortgage repayments compared to non-over-indebted at $150.54 per week and $73.33 per week, respectively.

“Households with no mortgage debt, most of which are retiree households, are least likely to be over-indebted,” Mr Kusher said.

“On the other hand, higher income households with a family that have outstanding mortgage debt are those most likely to be over-indebted.

“While you could say that families of working age with higher incomes are better able to service their debt, interest rate hikes or reductions in the value of their assets could have a significant impact on their ability to service their debt.”