Despite reaching record levels of total credit card debt and household debt, Americans are actually managing their debt better than in the past due to inflation masking the impact on balances and lower debt-to-deposit levels, according to an analysis by WalletHub. However, the rising trajectory of credit card debt and the increasing number of households carrying balances raise concerns, especially considering the high interest rates, which can take more than 17 years to pay off and cost thousands of dollars in interest. Meanwhile, savers have the opportunity to earn higher returns on cash due to higher inflation and interest rates.
The steep increase in public debt worldwide over the past decade is unlikely to be reversed due to factors such as population aging, rising interest rates, and political challenges, according to a research paper presented at the Kansas City Federal Reserve's annual central banking symposium. Governments will need to manage high debt levels through spending limits, potential tax increases, and improved banking regulations.
Australians are facing increasing mortgage stress, with 1.5 million borrowers at risk, as the number of households falling behind in repayments rises, indicating a growing cost-of-living crisis and potential financial challenges ahead.
Many Americans have a significant amount of home equity that can be tapped into, with homeowners sitting on nearly $30 trillion in equity, but borrowers should carefully consider the terms, rates, and risks associated with borrowing against their homes.
The aging population in America, particularly the boomers, is driving up housing demand and prices, leading to an affordability crisis and locking out middle-income buyers in the market.
Despite increased household wealth in the US, millions of households are struggling financially due to inflation, high interest rates, and rising living costs, which have led to record levels of debt and limited access to credit.
Approximately 30% of all unsecured loan borrowers, including credit card and personal loan borrowers, have debt levels that require them to allocate more than 50% of their income towards repayment, leading to financial distress and a reliance on loan sharks, according to ttb analytics.
As federal student loan payments are set to resume, surveys indicate that the majority of borrowers plan to cut back on spending and will have difficulty saving for retirement, potentially leading to a drop in consumer spending and impacting economic growth. Some borrowers are already struggling with increased stress and debt from additional financial obligations taken on during the payment pause, while higher-earning households also anticipate difficulties in making payments. While there are options available, such as income-based repayment plans or a one-year grace period, the overall financial strain is expected to have significant repercussions.
Rising prices and climbing mortgage rates are making it increasingly difficult for homebuyers to afford a home, as they are borrowing more money at higher interest rates, resulting in weakened financial positions and reduced affordability.
The number of households falling behind on mortgage payments has risen, with mortgage arrears increasing by 13% in the second quarter of the year, as homeowners and buy-to-let borrowers struggle to keep up with rising interest rates and financial challenges.
