Sydney, February 05, 2008
Approximately 300,000 Australian households face losing their homes within six months if mortgage rates continue to rise, according to Fujitsu Consulting’s latest Australian Mortgage Industry Stress-O-Meter.
Fujitsu Australia and New Zealand’s Managing Consulting Director, Martin North, said the Reserve Bank of Australia’s (RBA) decision to raise the cash rate by 0.25 basis points to 7 percent had lifted mortgage stress to record levels.
“Overall, we expect almost 750,000 Australian households to experience some form of mortgage stress by June this year if interest rates continue to rise,” Mr North said.
Key results of the latest survey show that since November 2007:
- Approximately 750,000 households will experience some form of mortgage stress by June 2008, up by 58 percent.
- The number of Australian households experiencing such severe stress that they may be forced to sell their homes within the next six months has more than doubled to 300,000.
- 188,000 households in severe mortgage stress today, up by 61 percent.
- An additional 284,000 households in mild mortgage stress, up by 65 percent.
“The global credit crunch, combined with recent rate increases, strong domestic inflationary pressure and rising petrol prices spell worrying times for mums and dads across Australia as they try to balance their budgets,” Mr North said.
“We’re seeing a geographical and socio-economic shift with mortgage stress spilling over from traditional ‘battler’ locations.
“All households have a tipping point. For the first time, we’re seeing ‘Affluent Stressed’ households.
“While house prices are rising across Australia, in some of these stressed suburbs, prices continue to fall. Not all household segments are equally impacted but the pain is now running deep for a significant and growing minority.” Mr North said the latest Mortgage Stress-O-Meter takes account of today’s interest rate rise, and rolling annual surveys of 26,000 consumers.
“Fujitsu’s Mortgage Stress-O-Meter is a more accurate predictor than the rough spending measure of 30 percent of disposable income,” Mr North said.
“People in severe stress are significantly behind with their mortgage payments, funding their day-to-day expenses through credit card debt, and are either entering default proceedings or trying to sell up.
“Mildly stressed households are managing to make mortgage payments close to on time, but as a result, are borrowing heavily on credit cards, and have had to severely curtail their spending.”
Fujitsu Australia and New Zealand Consulting’s Mortgage Stress-O-Meter indicates that at least five levers need to be manipulated to address the problem:
- Addressing land release for new properties on the urban fringe
- Reducing local authority land and development charges
- Introducing affordability guidelines and information for purchasers
- Regulating credit practices and mortgage brokers; and
- Reducing tax incentives for negative gearing.
The Fujitsu Consulting Stress-O-Meter is assessed by surveying households about their spending patterns.
“Fujitsu Consulting quantifies the number of households which are impacted by mortgage stress based on a series of structured questions that demonstrate their ability to finance their debt,” Mr North said.
Updated data from November, December and January is now included in the rolling 26,000 consumer sample. Households are segmented around 11 groups with discrete and disparate characteristics. This enables the Stress-O-Meter to highlight where stress is most prevalent.
Phone: +61 2 9113 9592 
E-mail: kimberley.ramplin@au.fujitsu.com
