Household mortgage stress still very high

Courtesy of Martin North:

The latest results from our household surveys confirms that there are more households in financial stress than before the pandemic hit. As the various Government support mechanisms are ratcheted back, we will see the true impact on the community. Household debt is also turning higher again.

We have 41.1% of mortgaged households (1.5 million) in financial flow stress, despite the lower interest rate environment. While many have paid down debt, other have borrowed more. For example, the average new first time buyer loan is 15-18% larger than a year back- so much for the maintenance of lending standards!

We discussed this in detail in our live show, last night.

Across the states, the patterns are familiar, with Tasmania still reporting the highest proportion of households in mortgage stress thanks to low wages, and rising home prices. Victoria continues to be impacted by the longer lock-downs. Rental stress is being exacerbated by the end of tenant protections, so expect to see more evictions, and rent rises in the weeks ahead. Property investors in NSW are still having rental flow issues (due to high vacancies and lower rents). Overall financial stress – the aggregated measure across all households is highest in NSW, ACT and VIC.

Across our household segments young growing families, and those on the urban fringe in high growth corridors are being impacted, although across our segments and stress categories, it remains a real patchwork.

The top post codes for mortgage stress include Narre Warren and Fountain Gate, 3805 in Victoria, and Liverpool 2170 in NSW.

The top rental stress post codes include Liverpool 2170, NSW, Mount Druitt and Lethbridge Park 2770, NSW and Westmead 2145 NSW.

Investor stress is highest is St Kilda 3182, Westmead 2145 and Surfers Paradise 4217 in QLD.

Cumulative financial stress is highest in Liverpool 2170, Mount Druitt 2145, and Westmead 2145.

The mapping of mortgage stress to post codes reveals the potential hot spots, which include many of the high growth corridors, where vast estates continue to be built and sold to people who extend themselves to buy them. Many are first time buyers. Given flat wages, and higher unemployment post JobKeeper, this is one to watch.

David Llewellyn-Smith


    • Urgh perish the thought! I’m hoping to pay my first home buyer mortgage of 50K off in a lot less than that (plus I’ve no descendents to pass the debt onto). Though having to quit my job to go live in my house is a hurdle I’ll navigate in a couple of months time. Better get back to packing

  1. Martin North has been given plenty of coverage on this site, but has he ever been right?
    I don’t follow him closely, but when I have glanced at this articles, there is usually plenty of doom and gloom.
    Yet, the property market is booming.
    He seems like a nice guy, but his forecasting is terrible, or maybe I haven’t been paying attention.

    • Cameron MurrayMEMBER

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

      An increase in saving? More mortgage stress
      Decided it’s 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 so 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.

      • VicDynoMEMBER

        I wonder why Martin would include savings as a cost? I have $0 left at the end of each fortnight, because a save so much. I must be in “stress” according to this. but if i gave it away instead of saving it, I would be “OK”. That’s very strange..

      • I think its a perfectly reasonable way to measure stress in a real world situation.
        We all have expenses and for most banks to ignore this and just go with LTI measures is not realistic.
        “Savings put aside” is an expenditure. Its money taken out of the cash flow. You could call it a rainy day fund.
        It’s not your account balance per say, that shows up at the end as a positive or negative net cash flow.
        That should roll over to the next month as income if positive.

  2. Martin_DFAMEMBER

    Simple – I look at net available cash flow. Its the only real way to assess the true impact on finances – including saving and debt movements.

    • Thanks Martin. Does a positive (or negative) cash flow roll over to the next months figures?
      For example if positive in Jan, does it become a contributor to income in Feb or is it just reset?
      Also, do you take into account extra mortgage repayments?

      What I am trying to get at is if there any understanding of peoples account balances over time to see if they have any buffer or equity build-up. This is especially important for offset accounts.

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