The number of Australian households likely to suffer from mortgage stress could top 600,000 by the end of the year, a new report from JPMorgan and Fujitsu Consulting has revealed.
At least 113,000 families will be so severely stressed that they may be forced to sell, according to the study. Fujitsu estimates that 70,000 households are currently experiencing severe mortgage stress across the country.
Fujitsu defines severe stress as families who are in significant risk of a default, are having difficulty in making regular repayments, have defaulted or have commenced forced sales. Mild stress occurs when households have curtailed spending to pay the mortgage but there is no significant risk of default.
"Severe stress has already spread from the traditional battlers to middle Australia, but in addition a wide range of households are now under mild stress, requiring them to max out credit cards to keep afloat," said Martin North, managing consulting director for Fujitsu Australian and New Zealand.
North added that if prime lending is repriced by 0.15% and the most risky lending by 2% by the end of the year, the number of households under severe stress will jump by 61% to 113,000 households, while mildly stressed households will increase from 171,000 to 488,000 within months. "We have reached a tipping point," he said.
Brian Johnson, banking analyst at JPMorgan, blames soaring house prices for the housing crisis. "Housing affordability has worsened as house price appreciation has outstripped growth in disposable income," he said.
Johnson noted that the rapid increase in house prices has also triggered the rise in borrowing levels among first homebuyers.
"Borrower gearing levels have risen. In the recent years, there has been a dramatic upshift in the gearing tolerance of new home borrowers. However, the predominance of variable rate loans, which accounts for 85.2% of Australian home loan balances, will likely see this increased gearing tolerance vulnerable to rising interest rates."
The findings revealed that the suburbs most likely to be affected by mortgage stress are:
• NSW: Eagle Vale, St Clair, Wattle Grove, Glenfield, West Wallsend
• Vic: Mount Evelyn, Sydenham, Mentone, Melton South
• Qld: Park Ridge, Forest Lakes, Taigum, Crestmean
• WA: Byford, Port Kennedy, Yokine, Beechboro
• SA: Greenwith, Kensington Park, Ingle Farm