Tag: Mortgage Stress

Mortgage Stress Climbs Again in October

We have completed our October 2018 mortgage stress analysis and today we discuss the results.

The latest RBA data on household debt to income to June reached a new high of 190.5.  This high debt level helps to explain the fact that mortgage stress continues to rise. Having crossed the 1 million Rubicon last month, across Australia, more than 1,008,000 households are estimated to be now in mortgage stress (last month 1,003,000). This equates to 30.7% of owner occupied borrowing households.

 In addition, more than 22,000 of these are in severe stress. We estimate that more than 61,000 households risk 30-day default in the next 12 months. We continue to see the impact of flat wages growth, rising living costs and higher real mortgage rates.  Bank losses are likely to rise a little ahead.

Our analysis uses the DFA core market model which combines information from our 52,000 household surveys, public data from the RBA, ABS and APRA; and private data from lenders and aggregators. The data is current to the end of October 2018. We analyse household cash flow based on real incomes, outgoings and mortgage repayments, rather than using an arbitrary 30% of income.

Households are defined as “stressed” when net income (or cash flow) does not cover ongoing costs. They may or may not have access to other available assets, and some have paid ahead, but households in mild stress have little leeway in their cash flows, whereas those in severe stress are unable to meet repayments from current income. In both cases, households manage this deficit by cutting back on spending, putting more on credit cards and seeking to refinance, restructure or sell their home.  Those in severe stress are more likely to be seeking hardship assistance and are often forced to sell.

This rise in stress, which has continued for the past 6 years, should be of no surprise at all.  “Continued rises in living costs – notably child care, school fees and fuel – whilst real incomes continue to fall and underemployment is causing significant pain. Many are dipping into savings to support their finances.”

Indeed, the fact that significant numbers of households have had their potential borrowing power crimped by lending standards belatedly being tightened, and are therefore mortgage prisoners, is significant. More than 40% of those seeking to refinance are now having difficulty. This is strongly aligned to those who are registering as stressed.  These are households urgently trying to reduce their monthly outgoings.

Probability of default extends our mortgage stress analysis by overlaying economic indicators such as employment, future wage growth and cpi changes.  Our Core Market Model also examines the potential of portfolio risk of loss in basis point and value terms. Losses are likely to be higher among more affluent households, contrary to the popular belief that affluent households are well protected.  This is shown in the segment analysis, with some more wealthy households up against it.

Regional analysis shows that NSW has 272,536 households in stress (276,132 last month), VIC 281,922 (276,926 last month), QLD 178,015 (176,528 last month) and WA has 132,827 (132,700 last month). The probability of default over the next 12 months rose, with around 11,630 in WA, around 11,300 in QLD, 15,200 in VIC and 16,200 in NSW.  The largest financial losses relating to bank write-offs reside in NSW ($1.1 billion) from Owner Occupied borrowers) and VIC ($1.74 billion) from Owner Occupied Borrowers, though losses are likely to be highest in WA at 3.6 basis points, which equates to $1,096 million from Owner Occupied borrowers.

Turning to the post codes with the largest counts of households in stress, fifth was Melbourne suburb Berwick and Harkaway, 3806, with 5,267 households in stress and 143 risking default.

In fourth place is Toowoomba and the surrounding area, in Queensland, 4350, with 6,437 households in stress and 256 risking default.

Next in third place is Campbelltown in NSW, 2560, with 6,781 households in stress and 110 risking default.

In second place is Tapping and the surrounding areas in WA, 6065 with 7,409 in stress and 298 risking default

And in first place, the post code with the largest number of households in mortgage stress this month is the area around Chipping Norton and Liverpool, 2170, with 7,732 households in stress and 116 risking default.

As always, it’s worth saying that given flat incomes, and rising costs, and some mortgage rate rises, the pressure will continue, and falling home prices will make things worse. Many people do not keep a cash flow, so they do not know their financial position – drawing one up is the first step and ASIC has some excellent advice on their MoneySmart website. And the other point to make is, if you are in financial distress, you should talk to your lender, they do have an obligation to help in cases of hardship. The worst strategy is simply to ignore the issue and hope it will go away. But in my experience, this is unlikely.

We will update the data again next month.

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Mortgage Stress Busts The 1 Million Households

Digital Finance Analytics (DFA) has released the September 2018 mortgage stress and default analysis update. We have just crossed the 1 million, for the first time ever in our history.

The latest RBA data on household debt to income to June reached a new high of 190.5[1].  This high debt level helps to explain the fact that mortgage stress continues to rise.

Across Australia, more than 1,003,000 households are estimated to be now in mortgage stress (last month 996,000). This equates to 30.6% of owner occupied borrowing households. In addition, more than 22,000 of these are in severe stress. We estimate that more than 61,000 households risk 30-day default in the next 12 months. We continue to see the impact of flat wages growth, rising living costs and higher real mortgage rates.  Bank losses are likely to rise a little ahead.

Martin North, Principal of Digital Finance Analytics says this rise in stress is to be expected, and should be of no surprise at all. Indeed, the fact that significant numbers of households have had their potential borrowing power crimped by lending standards belatedly being tightened, and are therefore mortgage prisoners, is significant. More than 40% of those seeking to refinance are now having difficulty. This is strongly aligned to those who are registering as stressed.  These are households urgently trying to reduce their monthly outgoings”.

“Continued rises in living costs – notably child care, school fees and fuel – whilst real incomes continue to fall and underemployment is causing significant pain. Many are dipping into savings to support their finances.”

Our analysis uses the DFA core market model which combines information from our 52,000 household surveys, public data from the RBA, ABS and APRA; and private data from lenders and aggregators. The data is current to end September 2018. We analyse household cash flow based on real incomes, outgoings and mortgage repayments, rather than using an arbitrary 30% of income.

Households are defined as “stressed” when net income (or cash flow) does not cover ongoing costs. They may or may not have access to other available assets, and some have paid ahead, but households in mild stress have little leeway in their cash flows, whereas those in severe stress are unable to meet repayments from current income. In both cases, households manage this deficit by cutting back on spending, putting more on credit cards and seeking to refinance, restructure or sell their home.  Those in severe stress are more likely to be seeking hardship assistance and are often forced to sell.

Probability of default extends our mortgage stress analysis by overlaying economic indicators such as employment, future wage growth and cpi changes.  Our Core Market Model also examines the potential of portfolio risk of loss in basis point and value terms. Losses are likely to be higher among more affluent households, contrary to the popular belief that affluent households are well protected.  This is shown in the segment analysis below:

 Stress by the numbers.

Regional analysis shows that NSW has 276,132 households in stress (270,612 last month), VIC 276,926 (270,551 last month), QLD 176,528 (175,102 last month) and WA has 132,700 (134,333 last month). The probability of default over the next 12 months rose, with around 11,589 in WA, around 11,300 in QLD, 15,300 in VIC and 16,252 in NSW.

The largest financial losses relating to bank write-offs reside in NSW ($1.1 billion) from Owner Occupied borrowers) and VIC ($1.45 billion) from Owner Occupied Borrowers, though losses are likely to be highest in WA at 3.4 basis points, which equates to $1,082 million from Owner Occupied borrowers.

Here is a more detailed regional breakdown.

[1] RBA E2 Household Finances – Selected Ratios June 2018

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Mortgage Stress Continues To Build In August 2018

Despite the “good news” from the GDP numbers yesterday, our latest mortgage stress report, to end August 2018 continues to track higher.

The latest RBA data on household debt to income to March reached a new high of 190.1[1].  On Tuesday, the RBA said ”One continuing source of uncertainty is the outlook for household consumption. Household income has been growing slowly and debt levels are high”; and last week “the main risks to financial stability will most likely continue to relate to credit quality. Notably, banks’ large exposure to a potential deterioration in housing loan performance is expected to remain a key issue”.

Our analysis of household finance confirms this and the latest responsible lending determinations also highlight the issues.

So no surprise to see mortgage stress continuing to rise. Across Australia, more than 996,000 households are estimated to be now in mortgage stress (last month 990,000). This equates to 30.5% of owner occupied borrowing households. In addition, more than 23,000 of these are in severe stress. We estimate that more than 59,000 households risk 30-day default in the next 12 months. We continue to see the impact of flat wages growth, rising living costs and higher real mortgage rates.  Bank losses are likely to rise a little ahead.

Recent events, such as the lift in some mortgage rates, the latest council rate demands, rising fuel costs and flat incomes continue to hit home”. In addition, as home prices are falling in some post codes, the threat of negative equity is now rearing its ugly head.

The fact that significant numbers of households have had their potential borrowing power crimped by lending standards belatedly being tightened, and are therefore mortgage prisoners, is significant. As we reported recently, up to 40% of those seeking to refinance are now having difficulty. This is strongly aligned to those who are registering as stressed.  These are households urgently trying to reduce their monthly outgoings.

Continued rises in living costs – notably child care, school fees and fuel – whilst real incomes continue to fall and underemployment is causing significant pain. Many are dipping into savings to support their finances.  The June 2018 household savings ratio, just reported, shows a further fall, at 1%. The ABS says [2]  “moderate growth in household disposable income coupled with strength in household consumption resulted in a decline in the household saving ratio to 1.0 per cent, recording its lowest rate since December 2007”.

Our analysis uses the DFA core market model which combines information from our 52,000 household surveys, public data from the RBA, ABS and APRA; and private data from lenders and aggregators. The data is current to end August 2018. We analyse household cash flow based on real incomes, outgoings and mortgage repayments, rather than using an arbitrary 30% of income.

Households are defined as “stressed” when net income (or cash flow) does not cover ongoing costs. They may or may not have access to other available assets, and some have paid ahead, but households in mild stress have little leeway in their cash flows, whereas those in severe stress are unable to meet repayments from current income. In both cases, households manage this deficit by cutting back on spending, putting more on credit cards and seeking to refinance, restructure or sell their home.  Those in severe stress are more likely to be seeking hardship assistance and are often forced to sell.

Probability of default extends our mortgage stress analysis by overlaying economic indicators such as employment, future wage growth and cpi changes.  Our Core Market Model also examines the potential of portfolio risk of loss in basis point and value terms. Losses are likely to be higher among more affluent households, contrary to the popular belief that affluent households are well protected.  This is shown in the segment analysis below:

Stress by The Numbers.

Regional analysis shows that NSW has 270,612 households in stress (267,298 last month), VIC 270,551 (279,207 last month), QLD 175,102 (174,137 last month) and WA has 134,333 (132,035 last month). The probability of default over the next 12 months rose, with around 11,200 in WA, around 10,800 in QLD, 14,700 in VIC and 15,800 in NSW.

The largest financial losses relating to bank write-offs reside in NSW ($1.1 billion) from Owner Occupied borrowers) and VIC ($1.43 billion) from Owner Occupied Borrowers, though losses are likely to be highest in WA at 5.1 basis points, which equates to $744 million from Owner Occupied borrowers.

The Numbers in Context (Responsible Lending).

As indicated in our report last month, mortgage stress does not occur in a vacuum. The revelations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Commission) have highlighted deep issues in the regulatory environment that have contributed to the household debt “stress bomb”. The Commission will report on an interim basis this month and its commentary on the finance sector and the regulatory structure are likely to be scathing.

Gill North, a principal of DFA and a professor of law at Deakin University “does not expect the Commission to propose major reforms to the responsible lending rules. Instead, she predicts the Commission will consider a range of mechanism to enhance compliance with the existing rules. Conversely, Gill expects the Commission will recommend significant reforms to the law governing mortgage brokers, including some form of best interest duty that requires credit intermediaries to prioritise the interests of the customer when potential conflicts arise.”

The Commission is unlikely to change the responsible lending rules because these regimes have been successfully enforced by ASIC, including actions against the largest banks. For example, in early 2018, a case against the Australia and New Zealand Banking Group was successful, and on the 4th September an action against Westpac was settled prior to the commencement of the court hearing.

In the case against ANZ, the Federal Court found that in respect of 12 car loan applications from three brokers, ANZ failed to take reasonable steps to verify the income of the consumer and relied solely on purported pay slips in circumstances where ANZ knew that the pay slips were a type of document that was easily falsified. The Court indicated that ‘income is one of the most important parts of information about the consumer’s financial situation in the assessment of unsuitability, as it will govern the consumer’s ability to repay the loan’.

The litigation against Westpac concerned the use of an automated decision system to assess home loans during the period December 2011 and March 2015. Under this automated system, Westpac used a benchmark Household Expenditure Measure when assessing approximately 50,000 home loans, instead of actual expense information, and in these instances, the actual expenses were higher than the benchmark estimate. In addition, for approximately 50,000 home loans, Westpac used the incorrect method when assessing a consumer’s capacity to repay a home loan at the end of the interest-only period. Westpac has admitted contraventions of the National Consumer Credit Protection Act 2009 (Cth) and the parties have submitted a statement of agreed facts to the Federal Court.

These cases and other responsible lending actions consistently confirm the need for all lenders to collect and verify a customer’s actual income and expenses. The nature and scope of these obligations are highlighted in ASIC’s Regulatory Guide 209 on responsible lending conduct. This regulatory guide indicates that the obligation for lenders to make reasonable inquiries is scalable and the steps required will vary. For example, more extensive inquiries are necessary when potential negative consequences for the consumer are great, the credit contract has complex terms, the consumer has limited capacity to understand the contract, or when the consumer is a new customer.

A Fuller Regional Breakdown is Set out Below.

 

[2] 5206.0 Australian National Accounts: National Income, Expenditure and Product

[1] RBA E2 Household Finances – Selected Ratios March 2018

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Household Financial Pressure Tightens Some More

Digital Finance Analytics (DFA) has released the July 2018 mortgage stress and default analysis update. The latest RBA data on household debt to income to March reached a new high of 190.1[1], and CBA today said in their results announcement ”there has been an uptick in home loan arrears as some households experienced difficulties with rising essential costs and limited income growth, leading to some pockets of stress”.

So no surprise to see mortgage stress continuing to rise. Across Australia, more than 990,000 households are estimated to be now in mortgage stress (last month 970,000). This equates to 30.4% of owner occupied borrowing households. In addition, more than 23,000 of these are in severe stress. We estimate that more than 57,900 households risk 30-day default in the next 12 months. We expect bank portfolio losses to be around 2.7 basis points, though losses in WA are higher at 5.1 basis points.  We continue to see the impact of flat wages growth, rising living costs and higher real mortgage rates.

Martin North, Principal of Digital Finance Analytics says “households remain under pressure, with many coping with very large mortgages against stretched incomes, reflecting the over generous lending standards which existed until recently. Some who are less stretched are able to refinance to cut their monthly repayments, but we find that the more stretched households are locked in to existing higher rate loans”.

“Given that lending for housing continues to rise at more than 6% on an annualised basis, household pressure is still set to get more intense. In addition, prices are falling in some post codes, and the threat of negative equity is now rearing its ugly head”.

“The caustic formula of coping with rising living costs – notably child care, school fees and fuel – whilst real incomes continue to fall and underemployment is causing significant pain. Many households have larger mortgages, thanks to the strong rise in home prices, especially in the main eastern state centres, and now prices are slipping. While mortgage interest rates remain quite low for owner occupied borrowers, those with interest only loans or investment loans have seen significant rises. Many are dipping into savings to support their finances.”

Recent easing interest rate pressures on the banks has decreased the need for them to lift rates higher by reference to the Bank Bill Swap Rates (BBSW), despite the fact that a number of smaller players have done so already.

Our analysis uses the DFA core market model which combines information from our 52,000 household surveys, public data from the RBA, ABS and APRA; and private data from lenders and aggregators. The data is current to end June 2018. We analyse household cash flow based on real incomes, outgoings and mortgage repayments, rather than using an arbitrary 30% of income.

Households are defined as “stressed” when net income (or cash flow) does not cover ongoing costs. They may or may not have access to other available assets, and some have paid ahead, but households in mild stress have little leeway in their cash flows, whereas those in severe stress are unable to meet repayments from current income. In both cases, households manage this deficit by cutting back on spending, putting more on credit cards and seeking to refinance, restructure or sell their home.  Those in severe stress are more likely to be seeking hardship assistance and are often forced to sell.

Probability of default extends our mortgage stress analysis by overlaying economic indicators such as employment, future wage growth and cpi changes.  Our Core Market Model also examines the potential of portfolio risk of loss in basis point and value terms. Losses are likely to be higher among more affluent households, contrary to the popular belief that affluent households are well protected.

The outlined data and analysis on mortgage stress does not occur in a vacuum. The revelations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Commission) have highlighted deep issues in the regulatory environment that have contributed to the household debt “stress bomb”. However, most of the media commentary on the regulatory framework has been superficial or poorly informed. For example, several commentators have strongly criticised the Australian Securities and Investments Commission (ASIC) for not doing enough but have failed to explain what ASIC has in fact done, and what it ought to have done.

The Commission has highlighted major concerns regarding the law and practice of responsible lending. North has published widely on responsible lending law, standards and practices over the last 3-4 years, and continues to do so. Her latest work (which is co-authored with Therese Wilson from Griffith University) outlines and critiques the responsible lending actions taken ASIC from the beginning of 2014 until the end of June 2017. This paper was published by the Federal Law Review, a top ranked law journal, this month. A draft version of the paper can be downloaded at https://ssrn.com/author=905894.

The responsible lending study by North and Wilson found that ASIC proactively engaged with lenders, encouraged tighter lending standards, and sought or imposed severe penalties for egregious conduct. Further, ASIC strategically targeted credit products commonly acknowledged as the riskiest or most material from a borrower’s perspective, such as small amount credit contracts (commonly referred to as payday loans), interest only home loans, and car loans. North suggests “ASIC deserves commendation for these efforts but could (and should) have done more given the very high levels of household debt. The area of lending of most concern, and that ASIC should have targeted more robustly and systematically, is home mortgages (including investment and owner occupier loans).”

Reported concerns regarding actions taken by the other major regulator of the finance sector, the Australian Prudential Regulation Authority (APRA), have been muted so far. However, an upcoming paper by North and Wilson suggests APRA (rather than ASIC) should be the primary focus of regulatory criticism. This paper concludes that “APRA failed to reasonably prevent or constrain the accumulation of major systemic risks across the financial system and its regulatory approach was light touch at best.”

Stress by The Numbers.

Regional analysis shows that NSW has 267,298 households in stress (264,737 last month), VIC 279,207 (266,958 last month), QLD  174,137 (172,088 last month) and WA has 132,035 (129,741 last month). The probability of default over the next 12 months rose, with around 11,000 in WA, around 10,500 in QLD, 14,500 in VIC and 15,300 in NSW.

The largest financial losses relating to bank write-offs reside in NSW ($1.3 billion) from Owner Occupied borrowers) and VIC ($943 million) from Owner Occupied Borrowers, which equates to 2.10 and 2.7 basis points respectively. Losses are likely to be highest in WA at 5.1 basis points, which equates to $744 million from Owner Occupied borrowers.

Top Post Codes By Stressed Households

[1] RBA E2 Household Finances – Selected Ratios March 2018

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HILDA Data Confirms Household Financial Pressure

From Nine.com.au.

Single-parent families are experiencing a near-unprecedented level of housing stress as soaring house prices force many into unaffordable rental properties.

Analysis conducted by the Melbourne Institute as part of its annual HILDA survey revealed over 20 percent of single-parent families are stretching their budgets further than ever to keep up with annual rent rises or changes in their mortgage.

Amongst all Australians, household stress peaked at an all-time high in 2012, when 11.2 percent of all Australians were classified as having to make “unduly burdensome” mortgage repayments.

In economic terms, housing stress is technically defined as spending more than 30 percent of a household’s disposable income on housing costs, not including council rates.

In 2016, where the HILDA survey data ends, 9.6 percent of the population were experiencing housing stress.

Although single-parent families were found to be under the most dire levels of housing stress, the survey found that single elderly Australians and renters are also suffering under the weight of paying rent or covering their mortgage.

Couples without children were found to have the lowest levels of housing stress.

“Among those with housing costs, private renters have the highest rate of housing stress and owners with mortgages have the lowest rate,” wrote HILDA survey researchers.

“Moreover, over the HILDA Survey period, housing stress has increased considerably among renters—particularly renters of social housing—whereas it has decreased slightly for home owners with a mortgage.”

The survey also found that the type of home you owned or rented was directly correlated to the likelihood of having difficulty in making rent or mortgage repayments.

Australians living in apartments were found to have the highest rates of housing stress, followed by those living in semi-detached houses.

People living in separate, free-standing homes were found to have the lowest rates of housing stress – most likely because they live away from heavily-populated urban centres.

“Housing stress is generally more prevalent in the mainland capital cities, with Sydney in particular standing out,” wrote the researchers.

“However, differences across regions are perhaps not as large as one might expect given the differences in housing costs across the regions.

“Also notable is that housing stress is very high in other urban Queensland. It is only in the last sub-period (2013 to 2016) that it is not the region with the highest rate of housing stress, and even in that period only Sydney has a higher rate.”

The HILDA survey follows the lives of more than 17,000 Australians over the course of their lifetimes and published information on an annual basis on many aspects of their lives including relationships, income, employment, health and education.

The latest findings back up analysis from Digital Finance Analytics (DFA), which estimates that more than 970,000 Australian households are now believed to be suffering housing stress.

That equates to 30.3 percent of home owners currently paying off a mortgage.

Of the 970,000 households, DFA estimates more than 57,100 families risk 30-day default on their loans in the next 12 months.

“We continue to see households having to cope with rising living costs – notably child care, school fees and fuel – whilst real incomes continue to fall and underemployment remains high,” wrote DFA principal Martin North.

“Households have larger mortgages, thanks to the strong rise in home prices, especially in the main eastern state centres, and now prices are slipping.

“While mortgage interest rates remain quite low for owner occupied borrowers, those with interest only loans or investment loans have seen significant rises.”

Alternative Mortgage Stress Scenarios

We discuss different mortgage stress scenarios, RBA minutes and coverage in the New York Times

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Mortgage Stress And Defaults – Alternative Scenarios

When we released our mortgage stress report for June 2018, we said that the number of households exposed to risks is rising, and if rates were to increase then around 1 million of households will fall into stress and some may default, up from 970,000 now.


The RBA minutes yesterday focussed in on the problem of household debt.

Members held a detailed discussion of the high level of household debt in Australia, informed by a special paper prepared for this meeting. Household debt has increased by more than household income over the preceding three decades in many countries, but particularly so in Australia. Two key drivers of this trend across countries have been the decline in nominal interest rates, predominantly reflecting lower inflation, and financial deregulation, both of which have increased households’ access to finance. Members noted that a distinguishing feature of the Australian housing market is that the bulk of dwellings are owned by the household sector. This has contributed to greater borrowing for housing by households in Australia compared with other countries, where the corporate sector owns a larger proportion of rental properties. Another feature of the Australian housing market that has contributed to greater borrowing by households is the higher cost of housing in Australia on account of a larger share of the Australian population living in urban centres, typically in large detached dwellings.

Survey data indicate that much of Australian household debt is owed by higher-income and middle-aged people, who tend to have more stable employment and often larger savings buffers. However, members recognised that a material share of household debt is held by lower-income households, which generally have higher debt relative to their income. Household assets in aggregate are valued at around five times the value of household debt and total assets exceed the value of debt for most households. Members noted, however, that most household assets are housing and superannuation, and that both of these are illiquid.

Members noted that high levels of household debt could affect economic outcomes. For example, households with high debt levels are more vulnerable to economic shocks and therefore more likely to reduce consumption in the face of uncertainty about their future income. Members also noted that changes in interest rates have a larger effect on disposable income for households with high debt levels, but that these households may be less inclined to borrow more at times when interest rates fall. Accordingly, members agreed that household balance sheets continued to warrant close and careful monitoring.

In fact our research says, yes, debt is a problem, and it is hitting many different types of household, including more affluent ones.

Our analysis of stress and defaults created a stir in the media, several radio and TV interviews, and some interesting discussions on social media.

One of these, with Peter on Twitter led to a question about how we make our assessment and scenarios and our definitions of mortgage stress (cash-flow based).  We include estimates of expected wages growth, inflation, cpi, interest rates etc.

So this led to a discussion where I volunteered to run a scenario using Peter’s parameters.

We also added in the tax changes and child care subsidy (in both scenarios).  We do not impose a particular family structure, but capture that in our surveys (which aligns to the ABS census distribution).

So, we ran our model with a 3% wage growth, 2.1% CPI and small rise in mortgage rates. Stress levels would begin to fall, but will still be higher than since 2000, because of the greater leverage and debt burden.

Here are the results, one year down the track.

So the impact of potential wages rises, in real terms is significant. A “good outcome!” However even then the risk in the system remains higher than we have been use to.  Defaults reduced by 6% while stress fell by more than 8%.

 

Bank Funding and Mortgage Stress

Yesterday I discussed the issues of bank funding and the risks from a hike in rates in the context of our overall work on mortgage stress. Essentially, if the majors proceed with a ~15 basis point hike in rates, the number of households in mortgage stress will rise from an estimated 970,000  to one million households; plus a consequential rise in subsequent defaults.

We then proceeded to develop the arguments on 2GB…

ABC Radio in Sydney…

and ABC Radio Melbourne.

Some confused stress with defaults… sometimes even simple messages get scrambled.