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New research has revealed that the average debt held by Australians is affecting their borrowing capacity by almost $100,000 on average.
The survey by comparison website finder.com.au found the average Australian with a personal loan is $12,643 in debt, while the average credit card balance is $3,114 and a car loan costs $16,320 on average.
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According to finder.com.au, if a consumer was to apply for a home loan with that combined $32,007 in debt, their borrowing capacity would be reduced by $99,000.
Breaking it down by the generations, the survey found Generation Y has debts totalling $29,191 on average, reducing their borrowing capacity by $97,000.
Generation X has average debts totalling $36,821, reducing their borrowing capacity by $121,000.
Baby Boomers appear to be the worst off, with the survey revealing that this generation is weighed down by $41,472 in credit card, personal loan and car loan debt, reducing their borrowing capacity by $129,000.
Finder.com.au spokesperson Michelle Hutchison said the average Australian’s debt decreases the likelihood of a lender being prepared to offer them a loan to purchase property.
“A car loan or a credit card may never earn you money and may cost you dearly with some causing home loan applications to be rejected,” Ms Hutchison said.
“Taking on too much debt before you buy a house could result in buyers needing to downsize their desired home substantially.
“With the average house price in Australia at $612,100, any reduction in borrowing power could severely limit what property you can afford to buy.”
Ms Hutchison noted that debts are equally as important as deposit, income and savings when potential home buyers are trying to get a mortgage.
[Related: Home loan sizes plunge]
