Over the past six months there’s been an interesting flow of data related to saving, spending and mortgage arrears.
Savings have reached their highest levels in many years, yet credit card debt has continued to rise – now nudging $50 billion.
Furthermore, there’s been a significant rise in mortgage arrears reported from the banks.
A quick interpretation of these figures suggests some people may have heeded the lessons of the GFC and given themselves a greater buffer against financial shock.
But while the savings figures reveal some people have moved to be frugal, the rising credit card figures and mortgage arrears show others are getting closer to the edge.
The cost of living is clearly up and for some people there’s little room to move, so inevitably some vital expenses will be charged to the credit card.
Now a good number of these people wouldn’t have any space to move; if costs rise against a fixed income and there’s no fat in an existing budget, that’s a tough situation.
However, others are in a significantly better position, maybe not with cash flow, but certainly with the assets they hold.
While it’s not popular to mention, a larger house can be downsized and newer cars can be replaced with older ones.
It’s often better to quickly admit there’s a problem so it can be dealt with, rather than let it get out of control.
The Commonwealth, Westpac and ANZ all recently recorded similar increases in mortgage arrears, with Westpac’s arrears in the 30-90 day period rising to their highest level since December 2008.
Those in arrears over 90 days jumped 35% since September 2010.
People in this situation now face a tough decision and at a bad time – they’ve fallen behind on their mortgage at the same time the housing market is falling.
Whatever decision they take, they’ll need to take it soon.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL / ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. If you’d like help with your financial future, we ‘re one of only six fiduciary financial advisors in Australia. We think we’re the best financial advisers in Tasmania.
