Families spending half of income on debt

MANY families are spending more than half their gross household income on paying debts, credit gatherer Veda Advantage says.

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Families spending half of income on debt

MANY families are spending more than half their gross household income on paying debts, credit gatherer Veda Advantage says.

It found 1.3 million of us spent more than half of the gross household income on paying debts, while 1.8 million spent more than 40 per cent on debt repayments.

But the new tough interest rate regime appeared to be working as demand for credit slowed in the first quarter of this year, Veda Advantage said, with credit card and personal loan inquiries down 0.2 per cent.

More data analysis found that families with higher incomes were also as risk with higher interest rates.

"It is not just about lower income earners who are feeling the burden of rising interest rates,'' Veda CEO Rory Matthews said.

"In fact higher income households tend to carry a heavier debt servicing burden. This means those individuals or families are vulnerable to changes in their personal or external financial circumstances.

"Increasing debt can then lead to overcommitment. Households may get by by making the minimum monthly repayments but their overall debt continues increasing.''

Mr Matthews said there was a need for a comprehensive reform of the credit reporting laws.

"More information allows lenders to create an accurate assessment of an applicant's credit exposure and so prevents consumers from overextending themselves financially,'' he said.