Consumer confidence in the ability to manage debt has shown a significant deterioration, with household concern in their ability to manage debt over the next six to 12 months doubling, a new survey has shown.

ME’s tenth biannual Household Financial Comfort Report shows concern over keeping up with debt repayments over the next six to 12 months has doubled from about 5% over the past few years to 10% in the past six months to June 2016.

Single parents reported the highest levels of concern in their ability to meet minimum debt repayments over the next six to 12 months (19%), followed by couples with young children (15%) and young singles/couples (12%).

Of particular concern is the rise in households drawing on their home equity to pay off debt (up 4 points to 11%) and to “make ends meet” (also up 4 points to 10%) during the first half of 2016.

Jeff Oughton, ME’s consulting economist and report co-author, said that there is a marked increase in households feeling vulnerable to income shocks associated with wage cuts, fewer hours worked and a lack of suitable jobs as well as lower dwelling prices in some parts of Australia.

“With a lack of cash savings or equity buffer in their home, there’s a marked increase in households expecting to be unable to service their debts, despite record low borrowing costs,” he said.

As for the overall finding, ME’s overall Household Financial Comfort Index – a measure of households’ perceptions of their financial comfort − dropped by 4% to 5.37 out of 10 in the six months to June 2016.

This result means about 90% of Australian households reported low-to-mid financial comfort, with only 10% reporting high comfort. The result reverses the increase in comfort reported in December 2015, and is the fourth lowest financial comfort level since ME commenced the survey in late 2011.

All 11 index components deteriorated, with the largest falls seen in net wealth, income, cash savings and investments, as well as households’ ability to handle short-term income loss, and anticipated standard of living in retirement.

In terms of generations, the comfort of baby boomers fell the most of any generation (down 7%) to the lowest level reported for that age group in the past couple of years. The comfort of Generation Y fell 2% whilst Generation X remained steady.

Baby boomers reported greater perceived stress with income, cash savings and net wealth in the six months to June 2016, despite continued gains in actual income and net wealth across households on average.

Baby boomers also reported greater worries with the ability to maintain lifestyle in retirement, as well as the impact of legislative change on their financial situation.

“The findings add to a number of recent policy debates such as changes to superannuation,” said Oughton.

“As many as 45% of baby boomers said they expect to be worse off after the recent Federal Budget. Furthermore, retirees reported the lowest levels of comfort since the survey began, although they’re still the most financially comfortable of any household life stage.”