Rates put the squeeze on consumers: Economy roundup
Friday, May 30, 2008/
A telling snapshot of the mounting pressure faced by many Australia households is provided by economic data on borrowing and mortgage delinquencies released today.
According to Reserve Bank of Australia figures released today, the amount of credit provided to private sector borrowers increased by 0.4% in April, well below market expectations that the 0.8% growth levels achieved in May would be repeated.
Significantly, while housing credit increased by 0.7%, business and personal credit both flatlined, suggesting businesses are cutting back on growth plans as consumers put away their credit cards to focus on paying off their mortgages.
“Higher interest rates and weak sentiment will continue to see consumers scaling back spending, and as a result, personal credit growth will continue to soften,” ANZ Bank economist Alex Joiner says.
For some homeowners, increased rates mean more than just buying a smaller TV, however, with new data showing an increase in the number of mortgagees missing home loan repayments.
According to ratings agency Fitch, the proportion of mortgage repayments that were overdue by at least 30 days was 1.88% at the end of May, up from 1.56% at the end of September 2007.
Mortgage delinquencies are likely to be much higher in parts of the country suffering the most severe housing distress, Fitch says, with homeowners in Sydney’s western suburbs the hardest hit.
On the markets today, at 12.20pm the S&P/ASX200 had fallen 0.6% on yesterday’s close to 5675.9, mainly because to falling oil and metals prices undermining support for resources stocks.
For similar reasons the Australian dollar has also fallen back below the US96c mark today, trading at US95.45c just after midday.
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