More than 794,000 households across Australia are now in mortgage stress, up from 767,000 in April, according to Digital Finance Analytics (DFA).

About 30,000 of these households are in severe mortgage stress. DFA also estimates that nearly 55,000 households risk default in the next 12 months.

“The main drivers are rising mortgage rates and living costs whilst real incomes continue to fall and underemployment is on the rise. This is a deadly combination and is touching households across the country, not just in the mortgage belts,” said Martin North, principal of the DFA.

Digital Finance Analytics analyses household cash flow based on real incomes, outgoings, and mortgage repayments. Additionally, rather than identifying a set proportion of income going to mortgage repayments, the DFA defines households as “stressed” when income does not cover outgoing costs.

Households experiencing mild stress have little leeway in their cash flows, whereas households experiencing severe stress are unable to meet repayments from current incomes. In both cases, households manage their deficit by cutting back on spending and relying more on credit cards. Many are also seeking to refinance, restructure, or sell their homes.

Households in severe stress are more likely to be seeking hardship assistance and are often forced to sell.

“Stressed households are less likely to spend at the shops, which acts as a drag anchor on future growth. The number of households impacted [is] economically significant, especially as household debt continues to climb to new record levels,” North said.

The analysis is derived from the DFA’s core market model, which combines information from its 52,000 household surveys; publicly available data from the Reserve Bank, Australian Bureau of Statistics (ABS), and Australian Prudential Regulation Authority (APRA); as well as private data from lenders and aggregators. The data is current to May.   

Below is a breakdown of households experiencing mortgage stress by region:

  May 2017 April 2017
New South Wales 216,836 211,000
Victoria 217,000 209,000
Queensland  145,970 139,000
Western Australia  119,690 109,000

The probability of default has also risen, rising to more than 10,000 in WA; 10,000 in QLD; 13,000 in VIC; and 15,000 in NSW.