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Mortgage stress at record high as almost one million Aussie households struggle

Almost one million Aussie households are suffering from mortgage stress. Courtesy: Herald Sun

The number of households in mortgage stress has reached a record high, with almost a third of home loan customers in financial trouble, according to new research.

A study by Digital Finance Analytics has found a further 4000 owner occupiers joined the ranks of those in mortgage stress across Australia last month.

There are now 977,000 households, or 30.3 per cent of borrowers, earning too little to keep up with repayments and meet living costs, the research house says.

“We continue to see households having to cope with rising living costs — notably child care, school fees and fuel — whilst real incomes continue to fall and underemployment remains high,” Digital Finance Analytics principal Martin North said yesterday.

“Households have larger mortgages, thanks to the strong rise in home prices, especially in the main eastern states, and now prices are slipping.

“Our surveys show that households are keeping their wallets firmly in their pockets as they try to manage ever-tighter cash flows.”

According to the group’s polling last month, “disadvantaged fringe” suburbs are home to the biggest share of households in mortgage stress, accounting for 274,200 homes.

However, “mainstream suburban” households are also among the most stressed, at 150,500 homes, followed closely by “young growing families”, at 147,600 homes.

Victoria also has the highest number of financially stressed households, at 266,960, although this was about 5000 fewer than the previous month.

New South Wales has 264,740 households in stress, about 400 more than last month, while Queensland is up almost 7300 households at 172,080.

There was an improvement in South Australia, with a fall of 1280 households in stress, down to 86,362.

“Household debt continues to climb to new record levels — mortgage lending is still growing at an unsustainable two-to-three times income,” Mr North said.

“Households manage this deficit by cutting back on spending, putting more on credit cards and seeking to refinance, restructure or sell their home.”

The worsening financial position of these households also hurts the wider economy as households reduce their spending as well as reducing bank and finance company profits.

Mr North said that based on the analysis, banks could be facing bad loan write-offs of $927 million in Victoria from potential owner occupier defaults or forced sales in the next year, and $1.3 billion in New South Wales.