Recent first-home buyers and affluent borrowers among most exposed
Households in mortgage stress across the 77 postcodes ranked in the OurTop10 Mortgage Stress Report, powered by Digital Finance Analytics (DFA), climbed by 31,318 in the September quarter to 450,539, an increase of about 7.5% in three months.
DFA counts an owner-occupier household as being in mortgage stress when its regular monthly outgoings, including loan repayments, exceed its income. Most of these households are still meeting repayments, but only by cutting spending, drawing on savings, or relying on credit.
It is the third consecutive quarterly increase since the index launched, following the rise reported in the Q2 edition. Over the year, households under strain in the tracked postcodes have jumped 21%, and 61 of the 77 postcodes recorded an increase this quarter.
The trend is consistent with separate national figures that use a different measure. Recent Roy Morgan research found 32.3% of mortgage holders were at risk of mortgage stress in the three months to August, up 8.4 percentage points since January and just below an 18-year high.
Who is most exposed
The report singles out recent first-home buyers who entered the market with small deposits, including users of the government’s 5% deposit scheme, as among the most vulnerable. It also highlights families in outer-suburban estates and heavily leveraged households in wealthier areas.
That last group is driving severe stress, which covers households that have fallen behind on repayments, are trying to refinance, have sought hardship help, or are selling. Across the four states covered, the fastest growth was in established, affluent suburbs. Drummoyne in Sydney’s inner west went from 224 to 1,591 severely stressed households, with Hornsby and Elwood also posting large increases.
Brokers are already seeing that pressure in their client books, with some reporting a rise in enquiries about interest-only repayments and longer loan terms.
DFA principal Martin North (pictured left) expects the trend to continue: “Next time, we expect stress to go higher still and continue to spread. We are at a tipping point.”
Melbourne leads, regions move fastest
Victoria’s top 10 postcodes added 10,501 households under strain, an 11.2% increase, taking the total to 104,325, the highest of any market. The growth was led by Derrimut and Tarneit in Melbourne’s west.
The steepest postcode movements, however, came outside the capitals. Manunda in Cairns jumped 156% in three months, the largest increase nationally. Tasmania recorded the steepest market-wide increase, at 13.7%, with no ranked postcode escaping a rise.
OurTop10 head of research Mansour Soltani (pictured right) said: “Melbourne is now the centre of the story: more stressed households than any other market, and the biggest rise. But the sharpest moves are in the regions — Cairns, Toowoomba, Launceston.”
