Trillion Dollar Baby

A mortgage milestone will soon be reached in Australia – the consolidated $1 trillion outstanding mortgage book – yet whether this is a cause to celebrate or not remains unclear.

It’s likely there will be no champagne falling from the heavens, and no trophy for the borrower who hocks themselves to the eyeballs with cheap debt and pushes the mountain into 13 digit territory.

To be sure of having reached the milestone we will have to wait for the January, or possibly February, Reserve Bank of Australia finance aggregates to be released.

Non-seasonally adjusted outstanding residential lending totals $995.7 billion as at December 2008, the RBA reported this month – increasing $3.3 billion over the course of the seasonally slow Christmas month.

So it’s highly probable the trillion dollar baby will be born sometime in early February, which for many borrowers will scream at them for 30 years or more, especially if official interest rates fail to remain at or near 45 year lows for the medium to long term.

The composition of this planetary mass of lending is $685.6 billion owner occupied, and $310.2 billion investment, with owner occupied lending accounting for 86 per cent, or $2.8 billion of the lending increase during December.

Fixed lending accounted for just 2.5 per cent of new residential loans taken out in November 2008, the latest figures from the Australian Bureau of Statistics report.

Essentially, Australians need to consider if loading up with cheap floating interest rate debt is wise, while gripping for dear life to their desks as a swath of redundancies continues to cut through workplaces, and all the while having the Damocles of a deep economic recession hanging over their heads.