debt down, housing up

We still love real estate, but our debt is coming down


Gerard McManus

July 14, 2009 12:00am

AUSTRALIANS are continuing to cut up the plastic, shunning borrowing for everything except property as households try to balance the family books.

But, while families trim their credit card expenses and baulk at borrowing for shares, Australia's love affair with real estate continues unabated, with new loans for houses and renovations being taken out in near record numbers.

The value of all personal loans fell 2.9 per cent overall in May to just over $6 billion, according to the Bureau of Statistics' latest figures.

This was the lowest level of personal borrowing since November 2005.

Total credit card borrowings slowed even further - by 4.8 per cent for the month.

This follows reports from the Reserve Bank that Australia's overall credit card balance fell for the first time in 14 years.

The average outstanding on credit cards is now just over $3000.

However, lending for housing continues to go in the opposite direction - rising by 3 per cent to just over $17 billion in the same month.

Borrowing commitments for mortgages have been rising since October following big cuts in interest rates.

A big increase in first home buyers has also propped up the market.

Official interest rates are at a 49-year low, and the Reserve Bank has signalled it may cut further if the economy gets significantly worse.

CommSec economist Savanth Sebastian said while Australians were showing some signs of caution when it came to borrowing, Australia continued to fare better than other countries where borrowing had ground to a halt.

"The improvement in confidence levels, and the likelihood that the worst in terms of job losses has passed, will prompt consumers to start borrowing and spending more consistently in coming months," Mr Sebastian said.