Across Australia, more than 767,000 households (or one in four households) were in mortgage stress as of April, according to Digital Finance Analytics (DFA). This is a significant increase from the number of households in mortgage stress in March (669,000).

Of the 767,000 households in mortgage stress last month, 32,000 were in severe stress. This equates to 23.4% of households, up from 21.8% in March. “We also estimate that nearly 52,000 households risk default in the next 12 months,” said Martin North, principal at the DFA. 

Digital Finance Analytics analyses cash flow based on real incomes, outgoings, and mortgage repayments. Households are considered “stressed” when income does not cover ongoing costs, rather than identifying a set proportion of income being allocated to mortgage repayments. 

“Those households in mild stress have little leeway in their cash flows, whereas those in severe stress are unable to meet repayments from current income. In both cases, households manage this deficit by cutting back on spending, putting more on credit cards and seeking to refinance, restructure or sell their home. Those in severe stress are more likely to be seeking hardship assistance and are often forced to sell,” North said. 

The DFA combines information from its household surveys, public data from the major regulators (the Reserve Bank, the Australian Bureau of Statistics, and the Australian Prudential Regulation Authority), as well as private data from lenders and aggregators. 

Regional analysis indicates that New South Wales has 211,000 households in stress; Victoria has 209,000; Queensland has 139,000; and Western Australia has 109,000. 

The probability of default has also increased, with more than 10,000 households in Western Australia; 10,000 households in Queensland; 13,000 households in Victoria; and 14,000 households in New South Wales considered in danger of mortgage defaults. 

The new figures follow last month’s warnings from RBA Governor Philip Lowe, who said that a growing number of households have a buffer of less than one month’s mortgage payments.