Australia | May 11 2009
By Chris Shaw
With the official cash rate at 3.0% those with mortgages are having an easier time of it than when rates were significantly higher a year or so ago but mortgage stress remains an issue, according to independent market analysis group Datamonitor based on the results of its Australian Financial Services 2009 Survey.
According to the survey, as many as one quarter of Australian mortgage holders are experiencing some level of mortgage stress, a ratio that equates to more than 1.3 million people. Many of these are relatively recent mortgage holders, with 30% of borrowers who bought their first home over the last 12 months admitting to some level of mortage stress.
As well, Datamonitor has found the level of concern over mortgages in the current environment has seen almost 40% of Australian mortgagors cutting back on discretionary spending, while 29% of all Australian consumers have indicated they expect to have some difficulty in paying back their bills over the next year.
At the same time, 21% of mortagors have indicated they will find paying back their mortage over the next five years either quite difficult or very difficult. In the view of group senior analyst Petter Ingemarsson, this suggests there will be implications for the Reserve Bank of Australia’s attempts to stimulate the economy by lowering interest rates.
The major issues according to Ingemarsson are the global credit market problems mean banks have not fully passed official rate cuts onto customers, while with unemployment rising consumers have become more cautious with respect to spending.
The latter issue in particular creates scope for a downward spiral as he notes lower consumer spending flows through to lower business spending and higher unemployment and this in turn means even greater caution on the part of consumers.
To some extent Ingemarsson notes this spiral is already in place as the group’s latest survey shows 86% of consumers expect Australia’s unemployment rate will increase in the coming year, which implies a bleak shorter-term outlook for the health of the economy.