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Mortgage Stress: How’s Your Town?

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A small rise in interest rates could push hundreds of South Burnett households into mortgage stress, new data shows (Photo: Nick Youngson - http://nyphotographic.com)

August 24, 2017

by Dafyd Martindale

New data estimates a 1 per cent increase in interest rates would push between 11 and 25 per cent of mortgage holders in the South Burnett’s two biggest towns into mortgage stress.

According to data released this week by mortgage industry expert Martin North and his company Digital Finance Analytics (DFA), a minimum of 244 South Burnett households are suffering from mortgage stress right now.

Mortgage stress is defined as not having enough income to cover mortgage repayments and other living expenses.

The problem has been caused by a combination of record high levels of household debt, interest rates at an all-time low, rising costs for essential services such as electricity, and a long period with little or no wages growth.

Nationally, DFA estimates that one in four mortgaged households are in stress right now.

But at current interest rates, the South Burnett is better off than many other parts of Queensland, including nearby Mundubbera where every one of that town’s 215 mortgage holders are believed to be in stress.

However, the situation could deteriorate quickly if interest rates rise.

Just a half a per cent increase in interest rates would expand the number of local households experiencing mortgage stress from 244 to 418; a 1 per cent rate rise would expand this further to 533; and a 2 per cent rise would push 652 households into stress.

This would quickly balloon to 780 households if interest rates rose 3 per cent; 1196 households if they rose 4 per cent; and almost 1400 if they rose by 5 per cent.

The DFA data does not provide any information for a number of South Burnett towns, including Blackbutt, Kumbia, Maidenwell, Memerambi, Tingoora, Proston, Hivesville or Murgon.

So it is likely the true number of local households suffering mortgage stress – or likely to suffer – if interest rates rise is higher than forecast.

southburnett.com.au has prepared a table for the South Burnett towns DFA has reported on which shows the number of mortgage holders in each one, and the percentage that would suffer mortgage stress if interest rates rose:

This table shows the number of mortgagees in each town where DFA data is available, and what percentage would suffer from mortgage stress if interest rates rose by between half a per cent and
5 per cent

Note: With the nation’s economy still relatively flat, the Reserve Bank is not expected to lift interest rates significantly in the short term but forecasters believe rate rises are inevitable over the longer term.

A 0.5 per cent increase in interest rates would duplicate the situation that prevailed in May 2015.

A 1 per cent rise would mirror the situation in August 2013, and a 2 per cent rise would return rates to where they were in November 2011.

Most analysts believe that rate rises above 2 per cent are unlikely in the next few years because any rate rise above this level would have catastrophic effects on mortgage holders nationwide.

The ABC’s Four Corners program has used the DFA data to produce Australia-wide mortgage stress maps, based on postcode areas. The ABC maps can be viewed by clicking here.


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