South African consumers’ debt situation is worsening, with the average debt-to-income ratio reaching its highest level, according to the DebtBusters’ second-quarter debt index.
The index, which tracks client trends quarter-on-quarter, showed that consumers inquiring about debt counselling were spending about 60 percent of their take-home pay to service debt. More concerning was that across all income bands the debt-to-income ratio was now at 122 percent, and it was at 152 percent for those taking home R20 000 or more.
Compared to the same period five years ago, the debt index found that unsecured debt level continued to increase, as it was now on average 32 percent higher than in 2016 and up by 49 percent among consumers taking home R20 000 or more.
This was a direct result of consumers using unsecured debt to offset the erosion of their take-home pay.
According to the index, real income was declining as inflation continued to bite. Nominal incomes were, on average, 3 percent higher than in the second quarter of 2016, but when cumulative inflation growth of 24 percent was factored in, real incomes shrunk by 21 percent.
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