Mortgage stress ratchets back up

Digital Finance Analytics (DFA) has released mortgage stress data for February, which ratcheted back up to 41.8% of households, up from 39% in January.

DFA’s survey is based on a survey of 52,000 people and measures free cash flow. It attributes the lift in mortgage stress to three main factors:

  1. people are spending more and draining their savings; and
  2. the number of people on principal and interest rate holidays has fallen as mortgage repayment holidays end; and
  3. stimulus payments from JobKeeper and the JobSeeker Coronavirus supplement have been cut.

The next chart shows that mortgage stress is once again hovering near record high levels despite record low mortgage rates:

Mortgage stress rocketed back up in February towards all-time highs.

In actual numbers terms, “more than 1.5 million mortgage holders have cash flow issues” across the nation, accounting for 41.8% of borrowers. Rental stress is also running at 34.9%.

“Young growing families, and those on the urban fringe are most exposed” followed by affluent households with multiple investment properties.

I do not consider the rise in mortgage stress a material risk to the property boom. Money is cheap, the cost of buying versus renting is favourable across most markets, there is an acute market shortage of stock available to buy, and economic conditions are favourable.

All key indicators are pointing up for Australian property prices.

Unconventional Economist
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  1. Hi Leith – Can you please tell me how you square this off against the massive increase in household savings that you are also reporting ? Thank you.

    • Cynical snake

      Because the people with mortgages are unlikely to be the group contributing to savings, and vice versa?
      So therefore a large percentage of each group could be having opposite experiences.

      • This. Mortgage rate cuts are a gift to those who borrowed at much higher rates. These are generally older mortgage holders that understand that ZIRP means they need to save harder for retirement.

      • Know IdeaMEMBER

        You should consider joining a debating team. It should have you on a career trajectory toward the top of the Liberal Party in no time.


          Nah to be a full Lib you need to aspire to the position that: “she’s a WHISTLEBLOWER therefore SHE’S the one who should be locked up, the lying cow”

          • happy valleyMEMBER

            SFM would probably say that that cow had a go but she should not have got a go.

  2. Christopher Reeve

    Key indicators are – strong iron ore price and low interest rates.

    Iron ore will collapse, interest rates will rise.

    That is all.

    • Know IdeaMEMBER

      A point of order, Mr/Ms Chairman: should that not be a reference to the price of iron ore?

  3. Cameron MurrayMEMBER

    The problem is that this metric doesn’t measure “mortgage stress”. It just measures household budget cashflow. It even includes “saving” as a negative cashflow (for some reason). You could easily call this same measure a “consumer optimism index”.

    An increase in saving? More mortgage stress
    Decided its time to renovate to take advantage of cheaper mortgage costs and low interest? More mortgage stress.
    Time for a holiday? More mortgage stress

    It also seems like there is likely to be a bit of double-counting – credit card repayments are included, but some are the items that you buy with a credit card. I reckon many survey participants must double count a fair bit of spending from that alone (more so now with the boost in credit-card facilitated online spending)

    See here for details.