Dream home may become a nightmare

AUSSIES finished last year under increasing mortgage stress, new data has revealed, leading industry figures to warn of a potential increase in home loan defaults in 2018.

Research firm Digital Finance Analytics’ latest mortgage stress and default analysis update estimated more than 921,000 Australian households (29.7 per cent) are under mortgage stress; a rise of more than 10,000 households since November. And 24,000 of those were in severe stress.

DFA principal Martin North believes 54,000 households are at risk of 30-day debt defaults over the next 12 months.

Making matters tougher, the ratio of household debt to income more than doubled between 1995 and 2015, from 104 per cent to 212 per cent, according to OECD data.

Analysing the research, Louis Velasquez, CEO of specialist lending firm Lucky Money, said rising living costs, stagnant wage growth and the likelihood of future rate rises meant danger was on the horizon for home owners.

“(The number of ) Australian households facing mortgage stress has risen by nearly 20 per cent in the past six months,” Mr Velasquez said.

“This worrying trend means net incomes are not covering ongoing costs in nearly a third of Australian households.

“People are unable to meet mortgage repayments from current incomes and are managing increasing debt by putting more on credit cards.”

Meanwhile, Gateway Credit Union’s recent Mortgage holders Sentiment Report revealed that 56 per cent of respondents who are paying off a mortgage or have done so in the past found their home loan to be a lifestyle-limiting burden.

Gateway CEO Paul Thomas pointed to ABS estimates that 29 per cent of households were classified as “over-indebted”, those with a mortgage made up the lion’s share of 47 per cent.

“While a mortgage is considered ‘good debt’,” Mr Thomas said, “borrowers need to make sure they’re not overstretching themselves and taking on more than they can handle.”