Mortgage stress to hit 1m homes

Rachel Browne
Sydney Morning Herald
June 29, 2008

ALMOST one in 10 Australian households is suffering from mortgage stress, with the figure predicted to come close to 1 million homes within three months.

Research by Fujitsu Consulting reveals that 784,000 of Australia's 8 million households suffer from some form of mortgage stress.

Of that, 318,000 homes were in severe stress while 465,000 were in mild stress.

Fujitsu Consulting's managing consulting director, Martin North, blamed rising interest rates as well as increases in petrol and grocery costs.

He estimated that stress would extend to 923,000 homes by September. "Interest rates have increased steadily for the past six years and consumers are paying more for petrol and food and other things," he said.

"It's a perfect storm and it's creating stress for a lot of people."

The 12 interest rate rises since May 2002 have led to repayments on an average $300,000, 25-year loan increasing from $1992 a month in 2002 to $2584 today.

NSW has the highest rates of mortgage stress with 260,000 households affected, of which 105,000 are in severe stress.

While most economists define mortgage stress as having to pay more than 30 per cent of the household income in mortgage repayments, Fujitsu Consulting surveyed 26,000 people, asking them questions such as whether they had reprioritised general spending patterns to make mortgage repayments and if they had missed a mortgage repayment.

NSW has the highest mortgages of any state as well as the most defaults and delinquencies - where a homeowner does not meet a monthly repayment by the due date.

State Government figures show that there were 1077 court-ordered home repossessions in the first quarter of 2008, compared with 921 in the first quarter of 2007.

June figures show that of the top 10 worst areas for delinquency, nine were in NSW and six of those were in Sydney. "NSW is suffering the most severe stress and more defaults," Mr North said. "And it's not just battlers. It's happening in more affluent areas such as Chatswood and Bondi. Normally those people would be fine but they were relying on the stockmarket and of course the stockmarket has taken a bath so suddenly they don't have the income from their investments."

Wizard Home Loans chairman Mark Bouris, whose company conducted the research in conjunction with Fujitsu Consulting, said he was starting a campaign to educate home borrowers about mortgage stress.

"I hope people see these figures and get a bit scared about borrowing money as a result of this. It's not in our interests for our clients to get into trouble.

"No lender wants to foreclose on a mortgage because it's a lose-lose situation for them and their clients."

This story was found at: http://www.smh.com.au/articles/2008/06/28/1214472834832.html