Household Finances – Digital Finance Analytics (DFA) Blog

Australia, The Land Of Droughts, Flooding Rains And Massive Household Debt!

A popular poem penned by Sydney-born Dorothea Mackellar in the early years of last century speaks lyrically of a vast brown continent shaped by ragged mountain ranges, sweeping plains, jewel seas, golden noonday sun, droughts and flooding rains.

But today any description of Australia must refer to the vast record-breaking expanse of debt held by households, mostly for mortgages. Total loans outstanding are according to the RBA $1.58 trillion for owner occupied mortgages and a further $749.1 billion for investor mortgages.

Australia has the third-highest level of household debt for countries in the Organisation for Economic Co-operation and Development (OECD), worth 211% of net disposable income per household.

And the IMF reported that Australia has the highest level of mortgage stress in the developed world, according to figures from the International Monetary Fund, with 15% of income devoted to paying off loans. But that is an average across all households and small business. In fact, of course many are now putting 40% or more of their disposable income on mortgage repayments, crowding out other spending.

Borrowers have been floored by a series of rate rises by the Reserve Bank of Australia to the current 4.35%. The increased cost of borrowing has left Australia at the top of the league for debt with Canada second followed by Norway and the Netherlands.

I was asked to extract data from my household surveys for news.com.au and they published various articles including “Sydney Stressing Over $1m Home Loan Debt.

This comes as a recent survey from Finder.com.au revealed many homeowners were just months away from having to give up their properties due to financial duress. Close to one in seven mortgage holders told the poll they would be forced to sell or seek hardship from their bank unless rates were cut by February.

As I said in the article, the amount of debt we have compared to incomes makes us massive outliers compared to the rest of the developed world.

Of course the pain is not equally shared, but more detailed analysis shows that in some areas of the country the average owner occupied mortgage is in the millions. So today, I am going to share my more detailed analysis, using our mapping tools.

http://www.martinnorth.com/

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Today’s post is brought to you by Ribbon Property Consultants.

Digital Finance Analytics (DFA) Blog

Australia, The Land Of Droughts, Flooding Rains And Massive Household Debt!

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Australia, The Land Of Droughts, Flooding Rains And Massive Household Debt!

Australia has the third-highest level of household debt for countries in the Organisation for Economic Co-operation and Development (OECD), worth 211% of net disposable income per household.

I was asked to extract data from my household surveys for news.com.au and they published various articles including “Sydney Stressing Over $1m Home Loan Debt.

As I said in the article, the amount of debt we have compared to incomes makes us massive outliers compared to the rest of the developed world.

http://www.martinnorth.com/

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

Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts

Today’s post is brought to you by Ribbon Property Consultants.

UK Inflation Falls Below Target (For Now)…

The UK CPI read for September 2024 as reported by the Office of National Statistics came in at 1.7%, which was below the Bank of England’s 2% target, and lower than analysts had been expecting. The BOE had estimated at 2.1% back in August. On a monthly basis, CPI was little changed in September 2024, down from a rise of 0.5% in September 2023.

The largest downward contribution to the monthly change in the CPI annual rates came from transport, with larger negative contributions from air fares and motor fuels; the largest offsetting upward contribution came from food and non-alcoholic beverages.

Services inflation in particular fell significantly thanks to air fares and hotel accommodation being cheaper, coming in at 4.9% compared to the 5.2% read which was expected.

This all but locked a further rate cut from the Bank of England when the Monetary Policy Committee next meets. The September read is also used to set the uplift in benefits next spring.

The UK Pound slipped against the USD, while yields on both the 2-year and 10-year gilts moved lower.

Overall inflation may be down, for now, but the pace of food price increases rose for the first time since early last year while the costs associated with living in your own home grew at the fastest since 1992. For homeowners and those looking to get a mortgage, therefore, the prospects of lower interest rates will certainly be welcome. But the Bank of England will continue in cautious mode, as they expect inflation to pick up again in the months to come.

http://www.martinnorth.com/

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

Look Who’s Wealthy Now!

One of the factors I see in my household surveys is wealth transfer from one generation to another, stoked by the paper wealth created by the massive upswing in home prices. We see more first-time buyers being assisted by the Bank of Grandparents, alongside the Bank of Mum and Dad. This means there is a historic wealth transfer is under way in Australia, for those fortunate enough to have parents or grandparents with assets, tough on those with none of those onramps to property and wealth. With a large chunk of that wealth stored in residential property assets, the shift is already reshaping property market activity, and will intensify in the years to come.

In my surveys I encounter a theme quite often, households who cannot get into the property market while their friends and colleagues seem able to do so. So how come some can and some cannot?

Well, it could be that others are simply just better at saving. Hustling. Investing. Negotiating salary. The second: they’ve got a loan of cash injection from the Bank of Mum and Dad or Grandparents (though often its not clear whether they will have to pay it back. And third, they are a beneficiary of the great intergenerational wealth transfer.

Demographic research firm McCrindle just published a report and they say Baby Boomers are passing on an estimated $6.2 trillion of capital to their children and grandchildren.

Since 2013, the percentage of 25 to 34-year-olds who think that Australia is a land of economic opportunity, where hard work brings a better life, has fallen from 80 per cent to 51 per cent. The same trend was observed across all age groups.

“Belief in the fair go … appears to be declining. We estimate that overall agreement that Australia is a land of economic opportunity has declined by 16 percentage points since 2013,” the researchers found.

http://www.martinnorth.com/

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

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Digital Finance Analytics (DFA) Blog

Look Who’s Wealthy Now!

00:00 / 00:19:49

Look Who’s Wealthy Now!

In my surveys I encounter a theme quite often, households who cannot get into the property market while their friends and colleagues seem able to do so. So how come some can and some cannot?

Demographic research firm McCrindle just published a report and they say Baby Boomers are passing on an estimated $6.2 trillion of capital to their children and grandchildren.

http://www.martinnorth.com/

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

DFA Live Q&A Replay: Stressed: A Deep Dive Into The Latest Household Data

This is an edited version of a live discussion about the findings from our surveys and models as we look at the latest in mortgage, rental, investor and overall financial stress across Australia. We will have our post code engine online so you can suggest specific post codes to examine.

http://www.martinnorth.com/

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https://digitalfinanceanalytics.com/blog/dfa-one-to-one/ for our One to One Service.

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Digital Finance Analytics (DFA) Blog

DFA Live Q&A Replay: Stressed: A Deep Dive Into The Latest Household Data

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Calibrating The Real Impact Of Households’ “Financial Relief”…

Today we look at the real impact of the recent Government support initiatives for households, as we update our models to the end of July, and adjust the tax bands, income changes, extra cost of living support and other initiates from both state and federal governments.

Actually, while there were some improvements, not all households benefitted equally, so we look at the data at a state, segment and post code level, to see who befitted the most.

On Tuesday 13th August we will run a live show on this topic and do an even deeper post code dive.

http://www.martinnorth.com/

DFA One To One

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

Today’s post is brought to you by Ribbon Property Consultants.

Digital Finance Analytics (DFA) Blog

Calibrating The Real Impact Of Households’ “Financial Relief”…

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How Do We Know That Mortgage Arrears Are Now Rising In Australia?

The latest RBA bulletin, just released, contained a couple of significant articles relating to mortgage arrears and serviceability. The first, “Recent Drivers of Housing Loan Arrears” shows that Housing loan arrears rates have increased from low levels since late 2022, with banks expecting them to rise a bit further from here. High LVR and DTI loans are most at risk. No surprise there.

The second, “How the RBA Uses the Securitisation Dataset to Assess Financial Stability Risks from Mortgage Lending” makes the point that the data used relating to around one third of loans, contains lags of up to 2 years especially for highly leverage loans, which limits the usefulness of that dataset.

Securitisation data collected by the RBA, forming the Securitisation Dataset, on residential mortgage-backed securities (RMBS) as a condition for eligibility as collateral in repurchase agreements with the RBA. These loan-level data are provided monthly, and are both timely and granular. The data provide detailed information about each loan that can be used to help form a view of financial health among mortgagors. As lenders can face incentives to select certain types of loans for securitisation or ensure the performance of loans after issuance, the data may not be fully representative of all mortgages in the Australian market. In other words, the loans are hand-picked for securitisation.

http://www.martinnorth.com/

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

Digital Finance Analytics (DFA) Blog

How Do We Know That Mortgage Arrears Are Now Rising In Australia?

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The Narrow Path Says Rate Hikes Are Coming In Australia!

The ABS released the latest employment data today, and in response, investors have bumped up their bets on an August interest rate rise after the jobs market recorded another month of strong employment gains in June.

As always there is a degree of numberwanging here, and the numbers are being flattered by the still strong migration, but the seasonally adjusted unemployment rate rose by less than 0.1 percentage point to 4.1 per cent in June, With employment rising by around 50,200 people and the number of unemployed growing by 10,000 people, the unemployment rate rose slightly to 4.1 per cent, and the participation rate rose to 66.9 per cent.

The employment growth figures were better than market expectations for gains of 20,000 and highlighted the continuing resilience of the local jobs market in the face of the fastest interest rate tightening cycle in decades.

“The participation rate in June was only 0.1 percentage point lower than the historical high of 67.0 per cent in November 2023. The employment-to-population ratio rose by 0.1 percentage point to 64.2 per cent, which was also close to its historical high of 64.4 per cent in November 2023.

This increase in employment was not enough to stop the jobless rate from rising to 4.1 per cent last month from 4 per cent in May, as a continuing surge in foreign arrivals helped push the participation rate to a near-record high of 66.9 per cent.

With inflationary pressures remaining uncomfortably strong, investors now ascribe a one-in-five chance the RBA board will increase the cash rate from 4.35 per cent to 4.6 per cent when it next meets on August 6, up from a 14 per cent chance before the jobs data. They are also pricing a 28 per cent chance of a move higher by September, up from 17 per cent on Wednesday.

http://www.martinnorth.com/

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

Digital Finance Analytics (DFA) Blog

The Narrow Path Says Rate Hikes Are Coming In Australia!

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