Last night Ross Greenwood ran a piece on Mortgage Stress, using the DFA Mortgage Stress Data, which we had recently updated to take account of the latest economic data and surveys. You can watch a video of the report, courtesy of NineMSN.
I covered the results of the updated modelling recently, and you can view some of the stress maps on the blog.
My point is that even at current low interest rates, some households today are already finding it hard to make ends meet, but should mortgage rates rise, (the long term average is a rate of around 7%, not the current 4.5%), then the number of households in difficulty would increase significantly in specific areas of some Australian cities. This flows on to dampening economic activity, and lower house prices, and links directly back to yesterdays data on real income falls in some segments. Those who are first time buyers, or young families are most exposed. In our surveys we found that less than half these households had a firm grip on their income and expenditure, and many of these did not run a household budget, relying on credit cards to plug the gap. Recent media coverage of DFA work is listed elsewhere on the blog.
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