Home Loans Australia

A Look at Over-Indebted Households

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The Household Income and Wealth Survey has determined those households that are over-indebted and those that are not.  The results are not necessarily what you’d expect with higher income households more likely to be over-indebted than lower income ones.

Last week the Australian Bureau of Statistics (ABS) published the 2015-16 results of their household income and wealth survey.  In the survey results they included a section on household debt and over-indebtedness.  The ABS consider a household to be over indebted if their debt is either three or more times their income, or 75% or more of the value of their assets.  Based on these measures the ABS considers 21.6% of households to be over-indebted, 51.9% of households to be not over-indebted and 26.4% of households have no debt.

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

The data also indicates that households with mortgage debt are more likely to be over-indebted than those households that either rent or own their home outright. Only 3.5% of households that own without a mortgage are considered to be over-indebted compared to 47.0% of household with a mortgage and 9.1% of rental households.  

(Source: CoreLogic )