Australian homeowners reduce their spending when their mortgage debts are higher, according to The Effect of Mortgage Debt on Consumer Spending.

Research released by the Reserve Bank of Australia (RBA) found evidence for a “debt overhand effect”  with households cutting back their spending when they have higher levels of outstanding mortgage debt.

“Households reduce their spending when the gross value of both their debt and assets increases,” the report said.

The country’s ratio of household debt to disposable income increased to a record-high 190%, according to the data. The study also found that home loans had the biggest impact on spending, despite rising incomes and house prices.

“We estimate that annual aggregate consumption growth would have been around 0.2 to 0.4% higher had mortgage debt remained at its 2006 level,” the study said.

The study also found increasing owner-occupier debt has significant implications on spending across the economy, and partly explains the “puzzle” of unusually weak household spending since the 2008-2009 global financial crisis.

The value of new lending households dropped 1.3% in May, according to the Australian Bureau of Statistics (ABS).

ABS said personal finance also dropped 0.7% in May, following a 4.2% rise in April, and is down 16.2% year-on-year.

CommSec found other signs that the economy was struggling, with loan values for home renovations dropping 1.2% to a record-low $210m in May.  It also noted that the average loan for an established dwelling fell, with homeowners choosing to reduce debts rather than spend.