Mortgage Stress – Page 24 – Digital Finance Analytics (DFA) Blog

ABC Four Corners Does Mortgage Stress

In 2017 ABC Four Corners looked at the Australian housing market, and discussed the pressure on households, even at current low interest rates thanks to rising costs of living, flat wages and the risk of rising mortgage rates.

They used data from Digital Finance Analytics household surveys to create an interactive map looking at mortgage stress across the country.

You can read more about how we calculate stress in our definitive guide, or watch our video discussing the latest analysis.

The underlying mortgage data is available in our core market model.

A quick reminder, the core market model ingests data from our surveys, focus groups and other private data, as well as information from various public sources.

The core model, working off a rolling sample of 52,000 household records enables us to analyse many aspects of the market. We have clients who take a range of outputs from the model.

In this video we walk through some of the key dimensions in the model, including segmentation, mortgage profiles and locations.

Note the data is for demonstration purposes only.

Mortgage Stress Gets Worse in July

Digital Finance Analytics has released mortgage stress and default modelling for Australian mortgage borrowers, to end July 2017. Across the nation, more than 820,000 households are estimated to be now in mortgage stress (last month 810,000) with 20,000 of these in severe stress. This equates to 25.8% of households, up from 25.4% last month. We also estimate that nearly 53,000 households risk default in the next 12 months, 2,000 down from last month.

We have been tracking the number of households in stress each month since 2000, and since a small easing in February 2016, the number under pressure have been rising each month. The RBA cash rate cuts have provided some relief, especially directly after the GFC, but now mortgage rates appear to be more disconnected from the cash rate as banks seek to rebuild their margins.

The main drivers of stress are rising mortgage rates and living costs whilst real incomes continue to fall and underemployment is on the rise. This is a deadly combination and is touching households across the country, not just in the mortgage belts. On the other hand, employment remains strong in NSW in particular, so income rose a little and small reductions in some owner occupied mortgage rates helped too.

This analysis uses our 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 July 2017.

Those 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.

Martin North, Principal of Digital Finance Analytics said “flat incomes and underemployment mean rising costs are not being managed by many, and when added to rising mortgage rates, household budgets are really under pressure. Those with larger mortgages are more impacted by rate rises”.

“The latest housing debt to income ratio is at a record 190.4[1] so households will remain under pressure. Stressed households are less likely to spend at the shops, which acts as a drag anchor on future growth. The number of households impacted are economically significant, especially as household debt continues to climb to new record levels.”

“We continue to see the spread of mortgage stress in areas away from the traditional mortgage belts. A rising number of more affluent households are also being impacted.”

Regional analysis shows that NSW has 225,090 households in stress, VIC 229,988 (217,655 last month), QLD 144,825 (141,111 last month) and WA 107,936 (106,984 last month). The probability of default fell a little, with around 10,000 in WA, around 10,000 in QLD, 13,000 in VIC and 14,000 in NSW. There were falls of about 1,000 from last month in NSW and VIC, thanks to improved employment prospects. Probability of default extends our mortgage stress analysis by overlaying economic indicators such as employment, future wage growth and cpi changes.

Here are the top 30 post codes sorted by risk of default estimated over the next 12 months.

[1] *RBA E2 Household Finances – Selected Ratios March 2016

Inequality Rules – The Property Imperative Weekly 8th July 2017

The Reserve Bank held the cash rate, more banks hiked mortgage interest rates, household debt rose again and our latest research showed that more than 800,000 households across Australia are experiencing mortgage stress. Welcome to the latest edition of the Property Imperative Weekly.

HSBC said the housing bubble fears were overblown. At a national level, a key reason for rising housing prices has been housing under-supply, Chief Economist Paul Bloxham wrote in a research note on Thursday and suggested that a significant fall in Australian housing prices, as occurred in the U.S. and Spain during the global financial crisis, is unlikely.

But data from CoreLogic showed whilst home prices rose in the last quarter, whilst auction volumes fell, and housing affordability deteriorated. The national price to income ratio was recorded at 7.3 compared to 7.2 a year earlier, and 6.1 a decade ago. It would have taken 1.5 years of gross annual household income for a deposit nationally at the end of the March compared to 1.4 years a year earlier and 1.2 years a decade ago. The discounted variable mortgage rate for owner occupiers was 4.55% and an average mortgage required 38.9% of a household’s income.

New data from the RBA showed that the household debt to income rose to a high of 190.4. Households are more in debt than they have ever been, and the main question has to be, can it all be repaid down the track, before mortgage interest rates rise so high that more get into difficulty.

Our June mortgage stress results showed that across the nation, more than 810,000 households are estimated to be now in mortgage stress up from 794,000 last month, with 29,000 of these in severe stress. This equates to 25.4% of households, up from 24.8% last month. We also estimate that nearly 55,000 households risk default in the next 12 months. The main drivers are rising mortgage rates and living costs whilst real incomes continue to fall and underemployment is on the rise. This is a deadly combination and is touching households across the country, not just in the mortgage belts.

We analyse household cash flow based on real incomes, outgoings and mortgage repayments. Households are “stressed” when income does not cover ongoing costs, rather than identifying a set proportion of income, (such as 30%) going on the mortgage. Stressed households are less likely to spend at the shops, which acts as a drag anchor on future growth. The number of households impacted are economically significant, especially as household debt continues to climb to new record levels.

Census data shows that Home ownership has continued to fall among younger Australians. Only 36 per cent of people aged 25-29 said they owned their home outright or with a mortgage – likely the lowest level since at least the 1960s. Home ownership for the next age group, 30-34, also declined, to 49 per cent, which is likely another record low.

Overall inequality in Australia is rising, between those who have property and those who do not. Australia has prominent examples of economic policies that disproportionately benefit the upper-middle class, such as the capital gains tax discount and superannuation tax incentives. We also have a geographically concentrated income distribution, with the rich living in neighbourhoods with other rich people. The poor are also more likely to live in close proximity to people who share their disadvantage.

There were major changes to mortgage rates and underwriting standards this week, with many following the herd by lifting rates for interest only borrowers, especially investors whilst making small downward movements in principal and interest loan rates, especially at lower LVRs.

NAB will start automatically rejecting customers who want to borrow a high multiple of their income and only pay interest on their home loan, amid concerns over the growing risks created by rising household indebtedness. While NAB already calculates loan-to-income ratios when assessing loans, it has not previously used the metric to determine whether a customer gets a loan, and such a blanket approach is unusual in the industry.

We have maintained for some time that LTI is an important measure. It should be use more widely in Australia, as it is a better indicator of risk than LVR (especially in a rising market).

Several more banks tweaked their mortgage rates this week. Virgin Money for example increased its variable and fixed rates for new owner occupied loans for LVRs of over 90% by 35 basis points or 0.35%, and increased its standard variable rates for owner occupied and investment interest online loans by 25 basis points.

Auswide Bank announced an increase to their reference rates for investment home loans and lines of credit of 25 basis points from 11 July 2017 will result in a new standard variable rate (SVR) of 6.10%. They blamed funding pressures and regulatory limits on investment and interest only lending.

ING Direct changed their reference rates, for owner-occupier borrowers, the principal and interest rates will decrease by 5 basis points. But for owner-occupier borrowers, interest-only rates will increase by 20 basis points and investor borrowers on interest-only loans will cop a 35 basis point rise. They are also encouraging borrowers to switch to principal and interest repayment loans.

Bendigo Bank lifted variable interest rates by 30 basis points for existing owner occupied interest only customers and 40 basis points for existing investment interest only customers. They also lifted business loans with new business interest only variable rates up by 40 to 80 basis points and fixed interest only rates increasing by 10 to 40 basis points. On the other hand, new Business Investment P&I variable rates will decrease by 15 basis points and fixed P&I interest rates decreased by 30 basis points.

The RBA held the official cash rate at 1.5 per cent for the tenth time on Tuesday. It hasn’t moved since a 25 basis point cut in August 2016. But Analysis shows that the gap between the RBA rate and the standard rate banks quote to mortgage borrowers is around the widest in 20 years. The Banks did not pass on the full benefit of the RBA’s record-low rates in order to offset costs and prop up profits. Last year there was a massive race to the bottom in terms of discounts to try to gain volume and share. Many banks dented their margins in the process. But now they’ve now got the perfect cover, thanks to APRA’s regulatory intervention, and so we expect to see mortgage rates continuing to grind higher, particularly for investors and anyone on interest-only. This will simply lead to more mortgage stress down the track whilst the banks rebuild their profit margins. Another example of inequality.

And that’s the Property Imperative to the 8th July. Check back again next week

Mortgage Stress Grinds Higher In June

Digital Finance Analytics has released mortgage stress and default modelling for Australian mortgage borrowers, to end June 2017. Across the nation, more than 810,000 households are estimated to be now in mortgage stress (last month 794,000) with 29,000 of these in severe stress. This equates to 25.4% of households, up from 24.8% last month. We also estimate that nearly 55,000 households risk default in the next 12 months.

The main drivers are rising mortgage rates and living costs whilst real incomes continue to fall and underemployment is on the rise. This is a deadly combination and is touching households across the country, not just in the mortgage belts.

[1] *RBA E2 Household Finances – Selected Ratios March 2016

Lower interest rates reducing mortgage stress – Roy Morgan

New results from Roy Morgan’s mortgage stress data show that in the three months to April 2017, 16.8% or 666,000 mortgage holders can be considered to be ‘at risk’ or facing some degree of stress over their repayments. This compares favourably with 18.4% or 744,000
mortgage holders 12 months ago.

These are the latest findings from Roy Morgan’s Single Source survey of 50,000+ people pa, which includes more than 10,000 owner occupied mortgage holders.

Mortgage stress is much higher among the lower income groups (Under $60kpa) where it currently reaches 85.3% for those considered ‘at risk’ and 65% for ‘extremely at risk’.

Mortgage stress is based on the ability of home borrowers to meet the repayment guidelines currently provided by the major banks. The level of mortgage holders being currently considered ‘at risk’ is based on their ability to meet repayments on the original amount borrowed. This is currently 16.8%, which is well below the average over the last decade.

DFA comments – interesting findings, presumably looking at owner occupied mortgages? The basis of assessment is different. Also, current repayment guidelines are in our opinion too generous, given current income growth. We think underwriting standards need to be tighter, judging by overall household cash flow, which have been tracking in our mortgage stress analysis.

Finally, whether 666,000 households from Roy Morgan, or 794,000 from DFA, are both big numbers!

What’s The Correlation Between Mortgage Stress And Loan Non Performance?

Last night DFA was involved in a flurry of tweets about the relationship between our rolling mortgage stress data and mortgage non-performance over time. The core questions revolved around our method of assessing mortgage stress, and the strength, or otherwise of the correlation.

We were also asked about our expectations as to when non-performing mortgage loans will more above 1% of portfolio, given the uptick in stress we are seeing at the moment.

Our May 2017 data showed that across the nation, more than 794,000 households are now in mortgage stress (last month 767,000) with 30,000 of these in severe stress. This equates to 24.8% of households, up from 23.4% last month. We also estimate that nearly 55,000 households risk default in the next 12 months.

However, it got too late last night to try and explain our analysis in 140 characters. So here is more detail on our approach to mortgage stress, and importantly a chart which slows the relationship between stress data and mortgage non-performance.

Our analysis uses our 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 May 2017.

We also make an estimate of predicated 30 day defaults in the year ahead (PD30) based on our stress data, and an economic overlay including expected mortgage rates, inflation, income growth and underemployment, at a post code level.

Here is the mapping between stress and non-performance of loans.

The red line is the data from the regulators on non-performing mortgage loans. In 2016 it sat around 0.7%. There was a peak following the 2007/8 financial crisis, after which interest rates and mortgage rates came down.

We show three additional lines on the chart. The first is our severe stress measure, the blue line, which is higher than the default rate, but follows the non-performance line quite well. The second line is the PD30 estimate, our prediction at the time of the expected level of default, in the year ahead. This is shown by the dotted yellow line, and tends to lead the actual level of defaults. Again there is a reasonable correlation.

The final line shows the mild stress household data. This is plotted on the right hand scale, and has a lower level of correlation, but nevertheless a reasonable level of shaping. After the GFC, rates cuts, plus the cash splash, helped households get out of trouble by in large, but since then the size of mortgages have grown, income in real terms is falling, living cost are rising as is underemployment. Plus mortgage rates have been rising, and the net impact in the past six months, with the RBA cash rate cut on one hand, and out of cycle rises by the banks on the other, is that mortgage repayments are higher today, than they were, for both owner occupied borrowers and investors. Interest only investors are the hardest hit.

Households are responding by cutting back on their spending, seeking to refinance and restructure their loans, and generally hunkering down. All not good for broader economic growth!

So, given the severe stress, mild stress and our PD30 estimates are all currently rising, we expect non-performing loans to rise above 1% of portfolio during 2018. Unless the RBA cuts, and the mortgage rates follow.

Australians Curb Spending as Household Debt Balloons

From Reuters.

Australia’s economy may have achieved a remarkable winning streak, avoiding a recession for 25 years, but there are now clear signs that the consumers who have driven much of the growth are running out of puff.

With cash interest rates at a record low and house prices near record highs, the nation’s household debt-to-income ratio has climbed to an all-time peak of 189 percent, according to the Reserve Bank of Australia (RBA).

That means there are an increasing number of people who have little cash for discretionary spending – on everything from cars to electrical appliances and new clothes – as their pay packets get consumed by large mortgages and high rental payments in the country’s red-hot property market.

And it’s not as if a sudden plunge in home prices would help – it might well expose and exacerbate the problem, at least in the short run, squeezing many who have bought into the frothy market with high mortgage repayments and little equity in their homes.

“We are seeing a considerable spike in stress even in more affluent households. Large mortgages, big commitments but no income growth,” said Digital Finance Analytics (DFA) Principal Martin North. “Stressed households are less likely to spend at the shops, which acts as a drag anchor on future growth.”

North estimates a record 52,000 households risk default in the next 12 months and that 23.4 percent of Australian families are under mortgage stress, meaning their income does not cover ongoing costs. That compares with about 19 percent a year ago.

“People are up to their ears in mortgages,” said Brad Smith, a car sales consultant at MotorPoint Sydney which has seen a stark slowdown in sales in the past six months. “They are all on a budget. Everyone’s got all their money in houses, that’s how it is.”

Australians are also facing a cash crunch because price inflation in essential items such as food, electricity and insurance is accelerating at a 3.4 percent annual rate at a time when Australian wages are rising at their slowest pace on record, just 1.9 percent in the year to March.

Meanwhile, growth in retail sales, personal loans and luxury car sales are all at multi-year lows, suggesting the household sector – nearly 60 percent of Australia’s A$1.7 trillion ($1.3 trillion) economy – is under severe strain.

A CONSUMPTION PROBLEM

Australia’s love affair with property is worrying the RBA which has repeatedly warned against the danger of excessive real estate borrowing and the impact on spending elsewhere in the economy.

The central bank is reluctant to raise interest rates to cool the property market as it is concerned that would hit domestic demand at a time when real wages growth has turned negative. Besides, borrowing by businesses is growing at the slowest rate in three years.

Still, signs of a spending pullback is prompting economists to rethink Australia’s strong growth projections.

Only last month, the RBA upgraded its gross domestic product (GDP) forecast by 25 basis points to an annual 2.75-3.75 percent by the middle of next year from 2.50-3.50 percent it projected in February.

RBA’s confidence emanates from a levelling off in mining investment after years of steep falls, a rebound in the price of iron ore and coal prices – Australia is a major exporter of both – from 2015 lows, and the home building boom.

However, many believe the central bank’s forecast might prove too optimistic.

Both Morgan Stanley and National Australia Bank believe the economy might have slammed into reverse in the March quarter, after rising 1.1 percent in the December quarter. First-quarter GDP data is due on June 7.

“As the housing market slows, we see consumption growth as a major risk amid record-low wages growth and ongoing headwinds to discretionary cash flows,” Morgan Stanley economist Daniel Blake said.

RETAILING PAIN

Weak consumer spending is proving a huge drag on retailers’ performance, with shares in furniture and appliance chain Harvey Norman and electronics shop JB Hi-Fi both trading near one-year lows.

Retail sales have hardly grown in the past few months. Even online sales have slowed, with all major categories including homeware, games and toys, daily deals and takeaway food shrinking in April, according to the NAB Online Retail Sales Index.

Car sales have flattened this year after solid growth in 2016 while sales of luxury cars and sports utility vehicles are at a four-year low.

For consumers such as Sydney resident Marie-Aimee Guillermin, there’s little ‘play money’ left after stepping into Sydney’s housing market with a A$1.4 million 3-bedroom house last month.

“We thought once we had the house we could take our foot off the brake a little bit but now that we have it I feel even less certain in terms of stability and financial security,” she told Reuters.

“So whether we’ll end up spending a bit more on clothes and restaurants and going out and what have you I don’t see that happening.” ($1 = 1.3377 Australian dollars)

(Reporting by Swati Pandey; Editing by Jonathan Barrett and Martin Howell)

Mortgage Stress Accelerates Further In May

Digital Finance Analytics has released mortgage stress and default modelling for Australian mortgage borrowers, to end May 2017. Across the nation, more than 794,000 households are now in mortgage stress (last month 767,000) with 30,000 of these in severe stress. This equates to 24.8% of households, up from 23.4% last month. We also estimate that nearly 55,000 households risk default in the next 12 months.

Martin North, Principal of Digital Finance Analytics said “Mortgage stress continues to rise as households experience rising living costs, higher mortgage rates and flat incomes. Risk of default is rising in areas of the country where underemployment, and unemployment are also rising. Expected future mortgage rate rises will add further pressure on households”.

“Stressed households are less likely to spend at the shops, which acts as a drag anchor on future growth. The number of households impacted are economically significant, especially as household debt continues to climb to new record levels. The latest housing debt to income ratio is at a record 188.7* so households will remain under pressure.”

“Analysis across our household segments highlights that stress is touching more affluent groups as well as those in traditional mortgage belts”.

*RBA E2 Household Finances – Selected Ratios Dec 2016.

Regional analysis shows that NSW has 216,836 (211,000 last month) households in stress, VIC 217,000 (209,000), QLD 145,970 (139,000) and WA 119,690 (109,000). The probability of default has also risen, with more than 10,000 in WA, 10,000 in QLD, 13,000 in VIC and 15,000 in NSW.

Probability of default extends the mortgage stress analysis by overlaying economic indicators such as employment, future wage growth and cpi changes. Regional analysis is included in the table below.

Record numbers of home owners approaching Mortgage stress

From Ten Eyewitness News

When it comes to paying off the Mortgage, it’s a slippery slope that could see the entire house of cards come tumbling down.

New figures released by the Australian National University have found that one in five Aussies are constantly struggling to pay their mortgage, while others have admitted to falling behind.

The results showed that almost one in every four mortgage holders would face difficulty keeping up with their repayments if interest rates increased by two percentage points.

It’s an ugly picture to paint, with one of four households nationwide in mortgage stress, Digital Finance Analytics principal Martin North said the risk of default was rising, especially in areas where underemployment and unemployment were also rising.

“Mortgage stress continues to rise as households experience rising living costs, higher mortgage rates and flat incomes,” Mr North said.

“Expected future mortgage rate rises will add further pressure on households.”

Tuesday’s Federal budget is predicted to contain housing affordability measures, but the ANU poll found 68 percent of those not in the housing market are concerned they will never be able to afford a home.

It’s a stark contrast; 75 percent of those surveyed believe owning a home is part of the Australian way of life, yet 87 percent are concerned future generations won’t be able to afford to buy a house.

Associate Professor Ben Phillips said the survey showed support for an increase in the supply of housing and public housing.

“The ANU poll also found almost half of homeowners would be willing to see their property stop growing in value to improve housing affordability while only 31.8 percent would not.

“This may suggest that the issue of housing affordability is acute enough that Australians may accept policy change that could reduce prices or the rate of price growth to allow more equitable access to the housing market,” he said.

The Latest Top 10 Post Codes In Risk Of Mortgage Default

Today using our latest mortgage stress and probability of default data, we explore the top ten highest risk post codes across the country. Specifically, we look at where we expect the largest number of mortgage defaults to occur over the next few months.

We explore the latest mortgage stress and default modelling, using data to the end of April 2017. We have already highlighted that overall mortgage stress is rising, with more than 767,000 households in stress compared with last month’s 669,000. This equates to 23.4% of households, up from 21.8% last month. 32,000 of these are in severe stress. We also estimate that nearly 52,000 households risk default in the next 12 months.

But now we look at individual post codes, and explore the top ten based on the number of households we expect to default. This is calculated using our 52,000 household sample with economic overlays for employment, inflation, interest rates and costs of living.

Note the labels in the chart above are only examples of locations within the postcodes.

As a general observation, many of the worst hit post codes are areas containing large numbers of newer property in the outer urban ring. Households here have large mortgages and limited income growth relative to house prices. But there are some important differences in terms of recent house price movements across the post codes.

We will count down the top 10, from 10^th down to the highest risk postcode. So stay with us to the end!

The tenth highest risk post code in Australia is 6027 in Western Australia. This is the city of Joondalup and includes places like Ocean Reef and Edgewater. It is about 25 kilometres north of Perth. It’s a fast growing area with lots of young families, lots of new homes and large mortgages relative to income. The average house price is $510,000, down from $570,000 in 2014. We estimate there are more than 1,900 households in mortgage stress in the area, and 211 are likely to default in the next few months.

In ninth spot is Victorian post code 3064. This includes Craigieburn, Mickleham and Roxburgh Park. This area is about 25 kilometres north from Melbourne. The average house price is $438,000, up from $330,000 in 2014. Again it is a fast growing area, with more than 60% of households holding a mortgage. The average age here is 30 years. We estimate there are 4,320 households in mortgage stress, and 212 are likely to default in the next few months.

Next at number eight is 4740 in Queensland. This includes Mackay and the surround areas, including Alexandra, Beaconsfield, Richmond and Slade Point. This area is more than 800 kilometres north of Brisbane, and is the gateway to the Bowen Basin coal mining reserves of Central Queensland. The average house price is $240,000 compared with $400,000 in 2014. We estimate there are more than 3,600 households in mortgage stress in the region, and 244 are likely to default in the next few months.

We go back to Victoria for the seventh placed postcode which is 3029, Hoppers Crossing. This is a suburb of Melbourne about 23 kilometres’ south-west of the CBD and has grown to become a substantial residential area, with about half of properties there mortgaged. The average age is around 35. The average house price is $440,000 compared with $340,000 in 2014. We estimate there to be more than 3,400 households in mortgage stress, and we expect 266 households to default in the next few months.

In sixth place in Western Australia, is 6164, the city of Cockburn. It is about 8 kilometres south of Fremantle and about 24 kilometres south of Perth’s central business district. It includes areas like Jandakot, South Lake and Success. Around 40% of homes in the region are mortgaged and the average age is 31 years. Average house prices are around $730,000 about the same as in 2014. More than 2,530 households are in mortgage stress here, and the estimated number of defaults in the next few months is 308.

Next, counting down to number five, is another WA location, 6065, the city of Wanneroo which is around 25 kilometres north of Perth on the rail corridor. Again a fast growing suburb, the city has had the largest population expansion out of any other local government area in greater Perth. The average house price is $425,000 compared with $480,000 in 2014. Nearly half of households here have a mortgage, and more than 7,400 are in mortgage stress. We estimate that 339 households are likely to default in the next few months.

In fourth spot is Cranborne in Victoria, 3977. It is a suburb in the outer south east of Melbourne, 43 kilometres from the central business district. Its local government area is the City of Casey which is one of Victoria’s most populous regions, with a population of well over a quarter of a million. The average house price is $425,000 compared with $330,000 in 2014. In 3977, close to half of all homes are mortgaged, and we estimate 2,750 households are in mortgage stress, including 344 in severe stress. We estimate around 340 households will default in the next few months.

So down to the top three. The third most risky postcode according to our analysis is Victorian post code 3030 which is the region around Derrimut and Werribee. Werribee is a suburb of Geelong and is about 29 kilometres south west of Melbourne. The median house price is $405,000, well above its 2014 level of $310,000. Here 3,730 households are in mortgage stress, and 342 are likely to default in the next few months.

In second place is another Western Australian post code, 6155, Canning Vale and Willetton. It’s a large southern suburb of Perth, 20 kilometres from the CBD. The population has been growing quickly with significant new builds, and 60% of households have a mortgage. The average house price is around $560,000, down from $610,000 in 2014. The average age is 32 years. We estimate there are 4,150 households in mortgage stress and 342 households risk default in the next few months.

So finally, in top spot, at number one, is another Western Australian postcode 6210, Mandurah. This also includes suburbs such as Meadow Springs and Dudley Park. Mandurah is a southwest coast suburb, 65 kilometres from Perth. The average home price is around $300,000 and has fallen from $340,000 since 2014. Here there are 1,430 households in mortgage stress but we estimate 388 are at risk of default in the next few months.

As a final aside, in twenty second place, is the highest risk postcode in New South Wales, 2155, Kellyville, which is 36 kilometres north-west of the Sydney central business district in The Hills Shire. The average house price here is $1.1 million, compared with $860,000 in 2014. We estimate there are 1,240 households in mild stress and we estimate 151 households risk default in the next few months.

So that completes our analysis of the current most risky postcodes. We will update our modelling next month, so check back to see how the trends develop. But in summary households in Western Australia are most exposed in the current environment, especially with house prices there falling.