China/US trade tensions could crush expat’s borrowing capacity

Expats should factor in the continuing China/US trade war when looking at their borrowing capacity back in Australia. An average Australian expat salary of $140,000 USD could lose up to $190,000 AUD in borrowing ability.

 Lenders generally consider 80% of an expat’s income for loan servicing to reduce any potential exchange rate risk. A 0.10c reduction in the USD/AUD exchange rate would reduce an expat’s assessable income by $17,000 or approximately $90,000 for the average $140,000USD income earner. 

Longer term effects may include an increase in the cost of living in the US which will result in an increase in monthly expenses for expats. This directly results in a further decrease in borrowing capacity, where an increase of $500 per month would reduce their borrowing capacity by $100,000.00.

Background

The main tool currently utilised for diplomacy is the use of trade tariffs to protect local industry. Trade tariffs may cause a major consumer shift for those Aussie expats currently working in the US.

The implications of continuing trade tensions in the US include:

  • A rise in the cost of Chinese manufactured goods, thus leading to a rise in consumer prices
  • A weakening demand for US natural resources. Most notably natural gas.
  • A weakening in the USD.

Need advice?

Advice Area

General Advice Warning

We do not guarantee that the information in these articles is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Share This