About 921,000 Australian households are under mortgage stress: analysis

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Mortgage Stress
Cars drive on a street which borders a housing subdivision in the western suburbs of Sydney April 23, 2008. Reuters/Will Burgess

New figures from the Digital Finance Analytics suggest that an increasing number of Australian households are dealing with mortgage stress. About 921,000 households were under mortgage stress last month, the research firm has estimated.

The number is up from 913,000 recorded in the previous month. This is equivalent to 29.7 percent of households in Australia. A closer look at the data would reveal that the number of households with severe stress jumped to 24,000 from 3,000.

The highest number of households under mortgage stress was New South Wales, Digital Finance Analytics' regional analysis shows. It recorded 258,572 last month, up from 251,576 in November. A household that fails to cover ongoing expenses is considered under mortgage stress.

Economically speaking, Digital Finance Analytics principal Martin North said the number of Australian households impacted is significant given that the household debt still rises to fresh record levels. He noted that mortgage lending keeps on growing at three times income and that such was not sustainable. The latest household debt-to-income ratio is now at a record 199.7.

Measures have been put in place to boost lending standards and ensure borrowers are protected. But North said there are now a number of households holding loans that would not be approved. He believes this is a significant sleeping problem and it is actually more aggravating than many people may have thought.

Those with investment and interest-only loans have seen higher rates than owner-occupied borrowers. "We expect some upward pressure on real mortgage rates in the next year as international funding pressures mount, a potential for local rate rises and margin pressure on the banks," Australian Broker reports North as saying. Interest rates are expected to head north in 2018, with banks likely to follow suit.

Meanwhile, online mortgage marketplace HashChing recently shared mortgage predictions and tips this year. One of these is to get a home purchase finalised sooner than later because major banks are likely to continue to nudge interest rates higher. This tip also applies to those who intend to refinance a mortgage.

North also had an advice for first home buyers, saying they will need to stump up a higher deposit to get into the market. “As a result, I expect more first time buyers will get help from the 'Bank of Mum and Dad,' which can be worth as much as $88,000,” he said, according to News.com.au.

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