Mortgage Crisis: 40% of Australian Homeowners Under Pressure
Mortgage Crisis: 40% of Australian Homeowners Under Pressure
3
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
A recent study has uncovered that an alarming number of Australian households are grappling with mortgage burdens, as over 1.4 million families find themselves in financial distress.
This amounts to more than 40% of current home loan holders, according to new data from Finder, a consumer finance comparison service.
The latest survey results, gathered consistently by Finder since 2019, revealed the most elevated levels of mortgage stress witnessed to date.
Compounding this concern, approximately 13% of surveyed households admitted to having missed one or more mortgage payments in the last six months.
The persistence of overleveraging among families is a significant component of this issue. As of August 2024, the typical owner-occupier loan has increased to $634,479, marking a 1.3% rise from the previous month. Over the past 12 months, the average mortgage figure has escalated by 9.3%, Australian Bureau of Statistics (ABS) data reveals.
Despite the economy showing signs of stagnation, the cash rate has remained unchanged since November 2023, keeping it at its highest point in 12 years. As Finder highlights, this has resulted in Australians allocating a disproportionate segment of their incomes solely to cover home loan repayments.
Insights from ANZ CoreLogic indicate an upward trend in income allocation towards mortgage servicing. Australians now use over 46% of their income for new mortgages, compared to 40% the previous year. The scenario is more severe in Sydney, where it takes in excess of 58% of an average household's income to manage mortgage payments.
Financial counselors commonly advise that households should not channel more than one-third of their income into mortgage payments.
Adding to the challenge is the diminishing savings buffers for Australians over the past decade. The ABS’s latest National Accounts report highlights a severe decline in the household savings ratio, plummeting to 0.6%-a substantial drop compared to a year-back in June 2022.
“While many mortgage holders have navigated rate hikes up until now, they are currently under acute financial pressure as their savings and emergency funds rapidly dwindle,” observed Finder’s Richard Whitten.
Whitten further emphasized, “For a growing number of Australians, housing-related costs are a primary stress factor, with numerous households struggling to stay afloat.”
The Australian Prudential Regulation Authority (APRA) has announced a significant policy change aimed at curbing potential risks in the housing market. Effective February 2026, APRA will implement a cap on high debt-to-income (DTI) home loans, limiting such loans to 20% of new home lending portfolios. This move is designed to address concerns over escalating property prices and accelerated credit growth. - read more
The Commonwealth Bank of Australia (CBA), the nation's largest lender by market value, has reported a modest increase in its first-quarter cash profit, reaching approximately A$2.6 billion-a 2% rise from the previous year. This growth is primarily attributed to strong performances in home loans and household deposits, which saw increases of A$9.3 billion and A$17.8 billion, respectively. - read more
In response to stringent lending criteria, a significant number of Australians are actively reducing their spending and personal debt to improve their chances of securing or refinancing home loans. A recent survey conducted by Finder, involving over 1,000 participants, revealed that 18%-approximately 3.9 million people-have taken such measures over the past five years to meet lender requirements. - read more
Embarking on the journey to homeownership is both exciting and daunting. It's a significant milestone that requires careful planning and disciplined saving. For many Australians, buying a first home represents a dream come true, and it's essential to approach it strategically. - read more
Debt consolidation is a strategy often utilized by individuals seeking to take control of their financial health. At its core, debt consolidation involves combining multiple debts into a single, more manageable loan, typically with more favorable terms such as a lower interest rate or a longer repayment period. - read more
Having a robust credit profile is one of the most critical factors for financial health, especially when seeking loans in Australia. Whether you're eyeing a new car, dreaming of a home or simply want to secure a personal loan for unexpected expenses, your credit score often dictates the outcome. Not only does it influence a lender's decision to offer you finance, but it also affects the interest rates you might be charged. - read more
Knowledgebase
Underwater Mortgage: A mortgage in which the balance owed on the loan is greater than the value of the property securing the loan.
