Category: Household Survey

April Household Financial Stress Rises

The latest data from our rolling household surveys reveals that the pressure on many households continues to build, despite the headline news of a booming recovery and jobs growth. Of course the missing element remains underemployment, where we still see many households struggling to get the income they need to cover their ongoing commitments. This is how we define stress – when incoming cash flow is not sufficient to cover ongoing costs.

Mortgage stress rose to 41.1% of borrowing households which translates to 1.52 million households, with the end of JobSeeker and JobKeeper in March.

Within the series both mortgage stress and rental stress were higher, although there was a small improvement in Victoria. Mortgage stress remains highest in Tasmania, at 55.8%, while rental stress is highest in NSW. Property investor stress is highest in NSW and ACT, and overall financial stress (which is a weighted average of all stressed households, against all households) was highest in NSW and ACT.

Across the DFA household segments, many Young Growing Families (which includes significant representation of First Time Buyers) are exposed, as are households living in the high growth high construction corridors around our major centres. But we also continue to see more affluent households who are often highly leveraged, with multiple properties also being caught. It is also worth highlighting that many first generation migrants are being caught too.

The postcodes with the highest levels of mortgage stress (measured by count of households) includes Chipping Norton 2170, Tapping, Wanneroo 6065, Toowoomba 4350 and Narre Warren 3805. So the pressures are wide spread, with the highest counts in those high growth corridors.

Turning to rental stress, the footprint is rather different, with Melbourne 3000 at the top of the list (thanks to many students and young workers in the area) followed by 2770, Liverpool and surrounds, 2145 which includes Westmead and Wentworthville, 2540 Jervis Bay and surrounds, and 2250, the area around Gosford. So rental stress appears in a range of settings.

Investor stress is led off by Queensland post code 4670 which includes Bundaberg, 2010 which includes Surry Hills and Darlinghurst, Meadow Springs and Mandurah 6210, 2145 Westmead and 3000 Melbourne.

Overall financial stress (our aggregate measure) was highest in 2170, Toowoomba 4350, 27770, 3000 and 3029, which includes Hoppers Crossing. Again this shows the wide distribution of those under financial pressure.

We discussed this in our recent show on DFA, together with some heat maps

We updated our core market model to take account of these changes, with our main scenario seeking an ongoing rise in property values ahead, but determined by the trajectory of the virus, vaccine rollout and border controls.

In conclusion, while many households are experiencing a rebound, there are many who are still caught in significant and growing financial pressures. Given that costs of many services are rising, while income is not, plus the larger mortgages being written at the moment, we expect stress to remain elevated for some time. And given the long cycle between stress, and ultimate property sale or mortgage default, it is likely we will see a continued build up in those financially exposed ahead.

Do People Think Home Prices Are Going To Go Up, Or Down?

My latest discussion with Steve Mickenbecker from Canstar.

Steve Mickenbecker is in Canstar’s Group Executive Team, bringing more than 30 years of experience in the Australian financial services industry. As a financial commentator for Canstar, Steve enjoys sharing his expertise across topics such as home loans, superannuation, insurance, mortgages, banking, credit cards, investment, budgeting, money management and more.

https://www.canstar.com.au/team-members/steve-mickenbecker/

Go to the Walk The World Universe at https://walktheworld.com.au/

Household Financial Stress Higher Than Before COVID

The latest results from our household surveys confirms that there are more households in financial stress than before the pandemic hit. As the various Government support mechanisms are ratcheted back, we will see the true impact on the community. Household debt is also turning higher again.

We have 41.1% of mortgaged households (1.5 million) in financial flow stress, despite the lower interest rate environment. While many have paid down debt, other have borrowed more. For example, the average new first time buyer loan is 15-18% larger than a year back- so much for the maintenance of lending standards!

We discussed this in detail in our live show, last night.

Across the states, the patterns are familiar, with Tasmania still reporting the highest proportion of households in mortgage stress thanks to low wages, and rising home prices. Victoria continues to be impacted by the longer lock-downs. Rental stress is being exacerbated by the end of tenant protections, so expect to see more evictions, and rent rises in the weeks ahead. Property investors in NSW are still having rental flow issues (due to high vacancies and lower rents). Overall financial stress – the aggregated measure across all households is highest in NSW, ACT and VIC.

Across our household segments young growing families, and those on the urban fringe in high growth corridors are being impacted, although across our segments and stress categories, it remains a real patchwork.

The top post codes for mortgage stress include Narre Warren and Fountain Gate, 3805 in Victoria, and Liverpool 2170 in NSW.

The top rental stress post codes include Liverpool 2170, NSW, Mount Druitt and Lethbridge Park 2770, NSW and Westmead 2145 NSW.

Investor stress is highest is St Kilda 3182, Westmead 2145 and Surfers Paradise 4217 in QLD.

Cumulative financial stress is highest in Liverpool 2170, Mount Druitt 2145, and Westmead 2145.

The mapping of mortgage stress to post codes reveals the potential hot spots, which include many of the high growth corridors, where vast estates continue to be built and sold to people who extend themselves to buy them. Many are first time buyers. Given flat wages, and higher unemployment post JobKeeper, this is one to watch.

Sydney

Melbourne

Brisbane

Adelaide

Perth

Hobart

ACT

Darwin

Whilst property prices are rising in many areas, the financial pressures on households are building, and we expect to see more casualties ahead. Financial stress can ultimately lead to significant social and behaviourial issues. Mortgage default rates (which are also rising) do not tell the full story.

Mortgage Stress Higher In February 2021

Well, against expectations – based on the main thrust of economic news (and spin), some may find it surprising to learn that our latest household surveys detected a RISE in Mortgage stress in February, based on our 52,000 or 0.5% rolling sample.

Remember that we are measuring free cash flow, and a range of factors have driven the rate higher. First, people are spending harder now, and draining their savings (some built large buffers last year). Second the number of people on principal and interest rate holidays from the banks has fallen as they restart some (any) sort of repayments, (which of course resets the default “timer”, conveniently). Third, more are weaning off JobKeeper, and payment rates on JobSeeker are dropping as the extra support is withdrawn. Finally, some have negotiated new loans, at lower rates, but others are not successful in this, due to credit history, or taking a larger loan. Support ends at the end of March, so expect to see more of this ahead.

And the snap lock-downs had a big impact on some incomes, which are growing only slowly, if at all.

It is worth remembering that some new loans are being made at up to eight times income – this is a very high multiple even in the current low rate environment. And rates may not be as low for as long as many currently expect!

Thus overall mortgage stress rose from around 39% last month to more than 41% this month.

Across the country, more than 1.5 million mortgage holders have cash flow issues, this is 41.8% of borrowers. Tasmania and NT had the highest proportion of households exposed, and Victoria rose to 45.4% in response to the recent lock-down.

We also measure rental stress, which is 34.9% of renters, investment property stress at 26.5%, and overall aggregate financial stress at 38%. In total around 4 million households are being crunched in some way.

Across the segments, young growing families, and those on the urban fringe are most exposed (this includes many recent first time buyers), while more affluent households are also caught, thanks often to multiple investment properties.

We can identify the top post codes for our four stress types, sorted by the number of households exposed. We see the same post codes appearing in multiple lists. There was a significant rise in the high growth areas around Melbourne, as well as Toowoomba in Queensland, and areas of New South Wales.

Underlying our modelling are our scenarios, which we have updated with the latest economic data inputs. There is a greater probability of home price rises, especially in some smaller states, and in the house, not high-rise unit segment.

And we discussed this analysis, together with the stress maps which accompany it in our recent live show.

Whilst some are falling over themselves to get into the market, we remain cautious, given the potential rise in stress, mortgage rates, and the tapering of Government support.

Its All Down Hill From Here: With Steve Mickenbecker

Steve Mickenbecker is Canstar’s Group Executive, Financial Services & Chief Commentator. https://www.canstar.com.au/

With more than 30 years of experience in the Australian financial services industry Steve enjoys sharing his expertise across topics such as home loans, superannuation, insurance, mortgages, banking, credit cards, investment, budgeting, money management and more.

CONTENTS

0:00 Start
0:32 Introduction
1:22 Latest Household Surveys
5:15 Retail
6:30 Low Low Rates
16:28 Buy Now Pay Later – UK Report
23:00 Customer Protections
24:40 Financial Education – The Spending Problem
32:40 Conclusions

Go to the Walk The World Universe at https://walktheworld.com.au/