Australians carry a high level of debt compared to other countries, but manage it well, Genworth has claimed.
In the insurer's new Genworth International Mortgage Trends Report, it has found that Australians spend 45% of their after-tax income on servicing debts. This compares to a 38% average in the other countries Genworth surveyed. The study, which looked at mortgage trends in Australia, Canada, India, Ireland, Italy, Mexico, the UK and the United States, found Australians are also more comfortable borrowing larger amounts to buy a home. Thirty-five per cent of Australians surveyed said they were comfortable taking out a mortgage above 80% LVR, as compared to 20% in the other countries surveyed.
Debt servicing, however, does not seem to be a problem for Australian households. The report indicated Australia outpaces most other countries when it comes to making extra payments on home loans. Forty-five per cent of Australians said they typically overpaid on their mortgage, while the eight-country average was only 26%. Australia was second only to India in the category, where 56.2% of borrowers make extra mortgage payments.
Though the study found Australians are performing well in servicing their debts, debt could stand as a potential barrier of entry to the housing market. One in five potential first home buyers indicated they spend more than 50% of their incomes servicing debt. Genworth CEO Ellie Comerford said this, plus concerns regarding housing affordability, could explain why many first time buyers are entering the market later. The study found the average age (28.6 years) of first time buyers in Australia, while below the eight country average of 30.1, is increasing rapidly.
"Australian FHBs are facing a worsening situation, with the average age of potential homebuyers accessing the local market increasing at a faster rate than average," she commented.
