Aussies are managing mortgages and credit card debt better in 2016

Thursday 17 March 2016

Article by Roisin Kelly-Goldsmith

Consumer habits have taken a positive turn this year, with Mortgage Choice reporting that Aussies are managing mortgage repayments better than last. ABS data also showed that credit card balances dropped by 2.4% in January.

In its 2016 Money Survey, Mortgage Choice found that nearly one quarter of respondents had at least 12 months wages sitting in their offset account or paid off towards their mortgage. By comparison, only 13% of Australians said they were in the same financial position last year.

“The vast majority of mortgage holders are ‘very comfortable’ managing their debt. Of course, this data is hardly surprising when you consider that interest rates are currently sitting at 60 year lows, resulting in significantly lower mortgage repayments for most homeowners,” said CEO John Flavell.

RELATED: Why the Australian property bubble is not going to burst

On the credit card front, RBA statistics showed that Aussies kept plastic debt 2.4% lower in the month after Christmas. This equates to the average credit card balance having fallen by $77 to $3,114, which CommBank economist Savanth Sebastian put down to consumers becoming more savvy with their credit cards.

"Cardholders are frequently paying off credit card debt by the due date and using cards to maximise loyalty points," he said.

Another strategy savvy consumers are using to keep their plastic balance down is by opting for 0% balance transfer cards to pay off the balance without racking up more debt in interest.

For instance, say you had an average plastic balance of $3,114 on the current average credit card interest rate of 17.39%. If you were making repayments of $400 per month, it would take you 9 months to clear the balance. Plus, you would end up paying $215 in interest! But by switching to a 0% balance transfer card like the AMEX Essential Credit Card, you would bring the balance back to zero one month earlier. This is assuming you stuck to the repayment plan of course!

How are you managing your debt this year? Here some Mozo money tips for a winning mortgage and credit card repayment track record:

  • If your budget will allow for it, try making extra mortgage repayments to minimise the debt in interest you’ll build up over time. To find out if this strategy would suit you, do some calculations in our repayments calculator.

  • Take advantage of the features relevant to your home loan. That could mean making extra repayments to minimise interest, then using the redraw facility instead of taking out a personal loan for big ticket purchases.

  • Lower your overall credit card debt by making your next repayment a little higher than usual. That way you’ll be paying less in interest and wipe that debt off sooner. You can find out more ways to manage your credit card balance here.


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