Overall some 8% (345,000) of mortgage holders in Australia in the year to August 2017 have been identified as having little or no real equity in their home, an increase from 7.1% twelve months ago. This is based on the fact that the value of their home is only equal to or less than the amount they still owe, placing them at considerable risk if they have to sell or prices decline.
These are the latest findings from Roy Morgan’s Single Source Survey which is based on over 50,000 interviews per annum, including more than 10,000 with owner occupied mortgage holders.
Apart from the ability to keep up with mortgage repayments, another critical factor in assessing financial risk for mortgage holders is to compare the value of their property with the amount outstanding on their loan. The purpose of this is to establish the level of equity (if any) they have, as this is a major component of most households’ financial position and potential risk.
Mortgage holders in WA most at risk
On average, the value of properties in Australia subject to a mortgage is well in excess of the amount outstanding but there are problem areas. The state at highest risk is WA where 14% (71,000) of mortgage customers’ have no real equity in their home.
Value of home is less or equal to amount owing
Source: Roy Morgan Single Source (Australia). 12 months ended August 2016, n= 10,746; 12 months ended August 2017, n= 10,251. Base: Australians 14+ with owner occupied home loan.
Over the last 12 months there has been an increase of 3.3% points in the proportion of mortgage holders in WA with little or no equity in their home. Tasmania has the lowest proportion of mortgage holders with little or no equity in their home, with only 4.9% (4,000). NSW is the second-best performer with 5.6% (81,000) of mortgage holders facing equity risk, followed by VIC with 6.1% (62,000), SA with 7.6% (26,000) and QLD with 10.3% (89,000). The strong performance in VIC and NSW is due mainly to the rapid rise in Sydney and Melbourne prices which has generally outpaced the amount owing on mortgages.
Lower-value homes face more equity risk
The mortgage holders with little or no equity in their homes have much lower average house values ($501,000) compared to all mortgage holders ($761,000).
Mortgage holders with home value less or equal to amount owing vs all mortgage holders
Source: Roy Morgan Single Source (Australia). 12 months ended August 2017, n= 10,251. Base: Australians 14+ with owner occupied home loan.
Across all states, the value of the homes overall with a mortgage is much higher than the value of homes owned by mortgage holders who have no real equity in their home. In NSW for example, the average value of homes with a mortgage is $975,000, compared to the much lower average of $623,000 for mortgage holders where the value of their home is less or equal to the amount they owe. In VIC the figures are $804,000 for the average home value with a mortgage, well above the $549,000 for mortgage holders with no equity in their home.
