Digital Finance Analytics (DFA) is claiming a fifth of first home owners risk losing their properties in the next few months.
Its Australian Mortgage Stress Analysis of 26,000 households claims 16% currently fall into the ‘severe mortgage stress’ category, which is defined as falling behind in payments, or receiving threats of foreclosure.
Low-to mid-income households were among the hardest hit.
The number of suburban homes in this demographic will rise by 4,000 before June 30 2013, according to the report.
Speaking to Australian Broker Online, Paramatta broker Kim Narayan, who works in one of the worst-hit regions for mortgage stress and arrears, confirmed many locals were moving further west as it had become too expensive.
“A lot of people struggle with affordability here, and since valuation has gone down it’s made it even harder,” she said.
The report hinted that a significant proportion of those facing severe stress were recipients of low doc loans, pre-2008.
"Most people don't realise that the average loan size is twice as big as it was in 2005 so many people are still mortgaged to the hilt,'' DFA director Martin North
Both Ms Narayan and broker Ben Eick of Nelson Bay, another badly-hit region, agreed 100% loans or low-doc loans could be a factor.
“We had a bit of a pre-GFC boom in 2005 and 2006, and people thought ‘this is good value for money and these places will keep appreciating’ and of course what they’ve done since then is depreciate. And that’s where they’ve come unstuck,” said Mr Eick.
“I think the reason arrears are generally high here is due to people wanting to take advantage of 100% lends a couple of years ago, and the high first home owner grant concessions at the time,” agreed Narayan.
Eick offered a stark warning for brokers in the face of increased arrears and foreclosures.
“Obviously you don’t get paid trail if a mortgage is in arrears, which is a big problem for brokers,” he said.