Recent Reserve Bank figures have revealed that Australian households now owe nearly $1600 billion, a staggering 28 per cent more than five years ago.

Added to this Australians now owe a harrowing $33 billion on credit card debt, much of it in interest from unpaid overdue principle.

Economists have responded by saying borrowing levels in Australia are amongst the highest per capita in the world.

Borrowers have used the current low interest rates to get more debt rather than repay what they already owe.

Financial experts are warning of financial stress when (not if) interest rates again begin to rise.

“I certainly think there’s going to be an issue when interest rates go up,” said Roger Mendelson, Chief Executive Officer of Prushka Fast Debt Recovery. “Anyone who says they won’t is denying the normal economic cycles.”

The most obvious influence on Australia’s increasing debt is the housing market. Owner-occupier debt has soared by 28 per cent to $945 billion in just five years. While in the same time investment housing debt has blown out by a jaw-dropping 41 per cent to $495 billion.

“They [borrowers] need to factor in an interest rate of 8 per cent,” Mr Mendelson continued, “and even that is low historically. If there’s any time to get your household budget into order, now is the time to do it and prepare for the bad times.”

Campbell Woskett, of Australian Credit Management, believed the easy access to credit in the past five years has contirubted significantly to the current debt splurge. Many people under 40 have no memory of the recession in the 1990s and so have no idea of the pain it can cause.

“Then,” he continued, “in 2008 we had a GFC. The government of the day built some schools as part of the stimulus package, while many people received a bonus $900 to go shopping. I recall younger workers saying to me, ‘Hey, f this is a crisis, bring it on’.”

But the numbers don’t lie. More Australians are finding themselves in financial difficulty each day.

One credit business, Oracle Lending Solutions, said they were turning credit seekers away each month. The business, said director Angelo Benedetti, didn’t want to overstretch itself with debt.

Many of the people seeking loans are doing so for debt consolidation: Combining the debt of several higher-interest credit cards into one lower-interest loan.

“Debt reduction should be the number one thing at the momen. Interest rates wil definitely go up in the future and it’s important to create a budget and build equity in yor property.”

This will allow you some ‘wriggle-room’ when interest rates begin to climb.

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