Mortgage Stress

The real potential cascade effect will happen in Sydney and Melbourne once interest rates finally rise !

Almost one-third of Australian households facing ‘mortgage stress’
Almost one million Australian households face ‘mortgage stress’ caused by slow wage growth and the rising cost of living, according to new data.
Across the nation 956,000 households were estimated to now face ‘mortgage stress’ – the circumstances homeowners face when their income struggles to cover ongoing living costs – research released yesterday by Digital Finance Analytics (DFA) shows.
That figure represents 30 percent of all households in Australia, including both low- and high-income earners, and has increased by more than 30,000 households since last month.

The data also shows that more than 21,000 households are in ‘severe stress’, or being unable to make repayments at all, and more than 55,000 households risk 30-day bank defaults over the coming year.
Martin North from DFA said the figures show the housing situation in Australia is dire and he believes it will only get worse.
“Things will get more severe, especially as household debt continues to climb to new record levels,” he said.

Mortgage lending is still growing at two to three times income. This is not sustainable.”

9NEWS Finance editor Ross Greenwood believes the figures reveal an underlying income problem facing most Australians who struggle to make ends meet and are forced to seek out second jobs.
“Your problem of life is - where does the money come from? A lot of these families I’m certain are trying to find extra work,” he said.

“We’ve still got relatively high underemployment in Australia – there’s not as much work around, there’s not as any hours around the place, so do you go and get a second job? Some people try and do that to work weekends.
“On top of that also, where does the wages growth come from? What we know at the moment is lots of jobs are being created in Australia but the problem is that that’s still not bringing enough money into these households to take the pressure off.”
When it comes to the state-by-state split presented by DFA, New South Wales led the country for mortgage stress with more than 260,000 households facing financial pressure.

Victoria recorded over 258,000 households living in mortgage stress, followed by Queensland and Western Australia while South Australia, Tasmania and the ACT all had less than 100,000 homes under pressure.
The Northern Territory recorded the least number of homes in stress, with just over 5000 households faced with mortgage strain.
Mr Greenwood said the research works as proof to show why the Reserve Bank of Australia will not look to raise interest rates, which currently sit at 1.50 percent.
“If interest rates were to start to rise in Australia, these families would be highly vulnerable,” he said.
“What we’re seeing right now is another reason why the Reserve Bank is not going to move interest rates any time soon in Australia.”
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