This transcript of an ABC radio interview provided some recent, and grave, statistics about the level of household debt in Australia.
Debt topped the $1 trillion mark. Assuming that there are about 10 million people working, that equates to about $100,000 for every working Australian.
With a rate rise on the first Wednesday in November looking increasingly likely, the pressure will be felt by consumers.
Yesterday I walked past a car advertising a lending business. It's slogan was 'We Lend Against Anything!'. In my opinion, that's not an exciting promise to consumers, that's a threat.
At the start of the year there were some people predicting that the next interest rate movement would be down. We have had two rises, with the strong possibility of a third. What does this mean for thoughtful investors?
1. Always be sure that there is room in your budget to increase interest repayments if interest rates rise
2. Consider using a fixed rate mortgage. Sure, you won't be happy if rates fall, however you have certainty that you will be able to meet your repayments if rates rise.
3. Be like a business in that using some borrowed money is good, however you don't want to use so much that there is any chance that you end up with some financial distress.
4. Focus on paying debt down to a reasonable level quickly.