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Australians feeling good about mortgages

Australians are most comfortable with their levels of long-term debt, particularly mortgages, out of all aspects of their finances.

ING Direct's new Financial Wellbeing Index indicates that Australians' median 'comfort level' in terms of long-term debt was rated at 6.5 out of 7. The report believes this is due to a 'serious effort' by many homeowners to get ahead of their loans: indeed, it reveals that almost one in two mortgage holders are making extra payments, and argues that this has meant average mortgage balances have fallen from $177,259 in the March quarter to $175,509 in the June quarter. Only 3% of mortgage holders are falling behind with repayments.

When viewed by state, Australians in NSW and ACT were most comfortable with their long-term debt levels at 6.6 out of 7, while WA residents were least comfortable at 5.9 out of 7.

The Financial Wellbeing Index measures six aspects of financial management in terms of comfort level: short-term debt like credit cards, long-term debt, household income, short-term credit like savings, long-term assets and the ability to meet household bills. The aspect of household finances that Australians were least comfortable with was savings, with 17% of households having no savings at all.

"Whether it's fallout from the global financial crisis or lessons learned from the Greek debt crisis, many Australians have reduced their home loan and credit card balances over the last quarter," said ING Direct CEO Don Koch.

"However, while we're now more comfortable about our debt levels than any other aspect of financial wellbeing, it's come at the cost of personal savings. In many households the pool of spare cash is drying up, and this poses a real threat if unexpected bills crop up."

By Kevin Eddy | 05 Aug 2010