The hot news from our surveys and models is that financial stress, mortgage stress and particularly rental stress has gone higher again, as more households struggle with cash flow issues (our stress definition is based on cash flow status).
We walk though the main results, across the states, households segments and post codes. We also geo-map the results.
Let me know if you would like me to run another live show on this analysis, with post code data available.
Join us for a live discussion tonight, you can ask a question live. We will look at the latest from our surveys, as well as the RBA’s minutes which were out today.
The latest edition of the DFA Household surveys (a 0.5% sample across Australia), reveals the creeping mortgage and rental stress which is continuing to reach new highs. We measure stress in cash flow terms – money in and money out, and where there is a deficit, households are identified as “stressed”. Often households will be able to hang on for months by tapping into savings, drawing down more from refinanced loans, or from other forms or credit, or by tightening their spending. Some have been able to gain temporary relief by refinancing to a cheaper loan (even if on extended terms), but as income growth remain below the current inflation rates, incomes continue to lose ground. Data this past week showed more than ever households were now working multiple jobs to get buy.
The rises in stress since before COVID are stark.
Analysis By State
We display the latest results by state and highlight in yellow where the proportion have rises since last month in yellow. Tasmania continues to experience the highest proportion of mortgage stressed households. But the more populous states of NSW and VIC reported strong increases. Rental stress remained highest in the ACT. Financial Stress, an aggregate measure across all households remained highest in NSW, where the average house price remain most extreme, compared to income.
Analysis By Cohort
We can also analyse the data by our segments, or cohorts. This is a critical dimension to understand, given that generally younger households, including first time buyers are the most exposed. But other cohorts, including first generation migrants, and older households continue to drop into stress. Underlying inflation, as well as increasing mortgage rates, and rents explain this.
Post Code Analysis
We list the top households – by count – for each post code. We use counts to avoid over-weighting small household post codes.
We find that the focus of high stress remains in the high growth new-development suburbs, where many households purchased ant peak low rates and high home prices. But regional areas, and more developed suburbs are also registering. This is a national issue, not just confirmed to the main cities.
Future Outlook and Conclusions
We expect the RBA to lift rates again, as inflation is still far from being controlled and it is both sticky and embedded. Prices for electricity will rise from 1 July by up to 25% in some east coast states, whilst the mortgage cliff is reaching its heights in the same period.
The recent FWC award will have a small inflationary impact, and we expect more wages rises in the services, as well as more prices rises as businesses seek to support their margins.
Households in cash flow difficulty should discuss their mortgage situation with their bank, build robust cash flows, and prioritise effectively, because this is a crisis years in the making, and it will not abate any time soon. Moreover, hopes of cash rate cuts this year are fading, despite the rising risk of recession and higher unemployment, both of which may amplify stress further. We will update our analysis in a months’ time.
The rate hikes from the RBA and BOC are important indicators for the FED decision next week. In short, rates are going higher for longer, suggesting a recession, and further pressure on banks. Are markets finally getting the message?
Could we be about to see a change in the property listing weather?
The rate rises are now starting to bite – as the lag after the RBA announcements translate into higher rates. And renters are also being hit. But the distribution of the pain is unevenly spread. This will not end well.
The Federal Government has [finally] declared Buy Now Pay Later products as credit products and has outlined a path to regulation in the months ahead, recognizing that the products can harm customers.
Big players like CBA pushed the Government into a more gentle regime than I think is idea,, but at least its a step in the right direction. But two questions, will BNPL appear on credit files, and what about those thousands of customers of these products who are already in over the heads. We note from our surveys significant growth in use of these products as inflation and interest rate rises bite.
This is too little too late!
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
I caught up with Steve from Canstar to discuss the latest mortgage rate moves, and how this is playing out across households and banks. With the expectation that rates might well go higher still, what can be done?
The latest from our modelling showing more pressure piling on households as mortgage rates and rents rise faster than incomes, and costs of living continue to bite hard.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
The latest results from our surveys and modelling to end March 2023 reveals that more financial stress is piling on households, thanks to higher rates, bigger loans, and rising costs of living. Income growth is not keeping pace.
So in this show we walk through the results, by post code. And we also make some general observations about how households can deal with the pressures.
http://www.martinnorth.com/ Go to the Walk The World Universe at https://walktheworld.com.au/
