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At LCollect we believe that knowledge is power. Every month our debt collection blog gives you practical tips, stories and news from around Australia and the world.

Increase in Debt Levels

Wednesday, July 01, 2009 - Posted by Philip Harvey

Present feedback we have received from our clients is that their delinquency ratios are at all time lows, with the majority of our clients below 1% in total arrears compared to their total loan portfolio. Whilst there is no one reason for this, we can generally say this is a result of our clients lending policies and avoiding broker originated finance.

Fujitsu Morgan white paper  reported;

"The total system dynamic LVR (i.e. total housing mortgage debt to the market value of Australian residential property) has risen from 12.1% in December 1992 to 24.2% in December 2007. Excluding the estimated 35% of residential properties with no debt, the dynamic LVR on geared residential properties is 36%. To highlight the household’s vulnerability to rising interest rates via this increased “gearing tolerance”, each 25bp increase in interest rates increases the interest burden on home loan borrowers by an estimated A$1.75bn (i.e. A$924bn x 76% x 0.25% = A$1.75bn). 
To highlight the household’s vulnerability to rising interest rates via this 
increased “gearing tolerance”, each 25bp increase in interest rates increases the interest burden on home loan borrowers by an estimated A$1.75bn (i.e. A$924bn x 76% x 0.25% = A$1.75bn)".

With interest rates having reduced significantly, the stress being experienced by debtors has reduced significantly. However the media & economists are already predicting that there will be no further interest rate cuts, and that interest rates will start to increase in 2010. It will be interesting to see how this economic outlook impacts bad debts in the years to come.


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