Mortgage boss hoses down housing stress, says borrowers better off now

THE boss of one of the country’s biggest mortgage brokers has hosed down concerns about rising housing stress, pointing out that borrowers are in a better financial position now than they were five years ago.

Mortgage Choice chief executive officer John Flavell argues that home buyers aren’t being forced into higher loans, they’re simply choosing to borrow more in order to purchase their dream home.

Data from property research firm, CoreLogic, supports Mr Flavell’s argument that the proportion of income needed to service current household debt is actually lower now than it was in 2011.

In Brisbane, 30.3 per cent of a household’s income is required to service an 80 per cent Loan to Value Ratio mortgage, compared to 40 per cent five years ago.

“So, while property is certainly expensive and the level of household debt is high, it would seem many Australians are actually in a better position now than they were five years ago,” he said.

“Nobody’s disputing the fact housing is expensive, but while housing prices have gone up, the cost of money has come down by a greater amount.”

Mr Flavell said that was in large part thanks to historically low interest rates.

And despite a recent report by credit ratings agency Moody’s showing more of us are falling behind in home loan payments, Mr Flavell argues that it’s mostly due to a change in personal circumstances, such as a relationship breakdown or job loss.

“That’s why people are falling behind in payments, not because they have been given access to credit they can’t afford,” he said.

“Borrowers aren’t being forced into higher loans, they are simply choosing to borrow more in order to purchase their desired asset.”

Mr Flavell also believes lending practices are improving.

“The banking industry is highly regulated and both brokers and lenders are more scrupulous than ever,” he said.

He said the majority of customers at Mortgage Choice were more than nine months in front of their mortgage repayments.

Mr Flavell’s comments come as the latest Household Income and Wealth Survey by the Australian Bureau of Statistics reveals higher income households are more over-indebted than lower income ones.

The ABS figures show 21.6 per cent of Australian households are over-indebted, while nearly 52 per cent are not, and more than 26 per cent of households have no debt at all.

CoreLogic analyst Cameron Kusher said the data showed that while families of working age with higher incomes were better able to service their debt, interest rate hikes or reductions in the value of their assets could have a significant impact on their ability to service that debt.