Borrowers experiencing growing discomfort

by Madison Utley12 Aug 2019

In the last six months, there has been a notable deterioration in the financial comfort of homeowners with a mortgage, according to recent data. 

ME’s latest Household Financial Comfort Report attributed the decline to the tightening in the availability of credit, continued affordability concerns and high housing debt.

The majority of the 11 categories included in the index charted a decrease in comfort over the six months to June 2019.

“Despite lower mortgage loan rates, expected cuts in personal income tax and higher local and global equity prices, this is largely a consequence of continued decreases in the value of residential property in many parts of Australia,” said consulting economist for ME, Jeff Oughton.

“It’s evident that despite the latest monetary policy changes, there remains high levels of housing debt worry and actual payment stress among Australians.”

The cost of necessities was named by 44% of those surveyed as their most significant financial concern. Following with a 10-percentage point spread was the 34% of households that recorded anxiety over the level of cash savings on hand as their leading worry.

Of the households with mortgages, 43% indicated they contribute around a third of their disposable income or more towards paying the loan.

While more than 41% of households feel optimistic about their dwelling prices rising over the coming year, 11% are prepared for values to fall further.

Investors are more optimistic than owner-occupiers, with 46% expecting the value of their investment to rise during the next 12 months, with only 9% anticipating a decrease.

The highest levels of financial comfort were identified in NSW/ACT, closely followed by VIC. 

Conversely, overall comfort fell in QLD, TAS, and SA/NT, with the levels recorded by Brisbane, Perth and Adelaide residents plummeting to match the low levels reported in regional Australia.