Property
The Australian mortgage belt is heavily reliant on two incomes to meet bank loan repayments. With the highest household debt in history, a third of owner occupier home loans could face mortgage stress if one of the borrowers becomes unemployed or is forced into underemployment. Australian underemployment has reach a historically high of 8.7 per cent and has triggered an increase in the number home owners unable to meet their home loan repayments, according to the global credit rating agency Fitch Ratings. Dual-income households has now been identified as an Australian banking risk should repayments rise or employment conditions sour further based on their ability to service repayments.
In addition, the Roy Morgan survey, ‘Spotlight on Finance Risk’ has revealed that 67.2 per cent of owner-occupied mortgages are serviced by dual-income households. Roy Morgan said such a heavy reliance on two incomes meant that losing one or underemployment was a bigger blow than a doubling in interest rates. "The worsening arrears may be due to high underemployment, despite falling unemployment," Fitch analysts wrote in their quarterly study of Australian Residential Mortgage Backed Securities.
MORE than a third of owner-occupied home loans held by dual-income households would be classified as under mortgage stress were either income earner to drop out of the workforce, a new survey has found. And more than two-thirds of the total owner-occupier mortgage pile is being serviced by two-income households, raising a potential new threat to economic growth should repayments rise or employment conditions sour. Australia’s mortgage belt has long been a story of the power of two, with sharply rising property prices over the past three years making it increasingly difficult for the average wage earner to shoulder repayments on their own. An ongoing Roy Morgan survey called Spotlight on Finance Risk — in which more than 500,000 interviewees have contributed over the past decade — found that 67.2 per cent of owner-occupied mortgages are now held by dual-income households.
OVERCOMMITTED home loan customers are worried about meeting their repayments despite interest rates being at record lows and many concede they’ve taken on too much debt. Borrowers admit they’ve increased their debt levels so they can cover hefty expenses including holidays, school fees and household goods. And their concerns deepen — one in five people are worried how they will cope paying off their debts once interest rates eventually rise.
The steady rise in underemployment in the Australian workforce is leading to an increase in the number home owners having difficulty paying for their loans, according to the global credit rating agency Fitch Ratings.Fitch said a rise in mortgage arrears is a surprise given the strong economic environment, appreciating housing market, low-interest-rates and low-but-positive real wage growth."The worsening arrears may be due to high underemployment, despite falling unemployment," Fitch analysts wrote in their quarterly study of Australian Residential Mortgage Backed Securities. The "Dinkum RMBS Index" report found mortgage arrears rose by 4 basis points to 1.14 per cent in the June quarter and 6 basis points over the year.
Foreign hedge funds and other observers have consistently warned of an Australian property bubble that could burst, reducing prices by up to 50 per cent. What would need to happen for that scenario to eventuate? Sheryle Bagwell takes a look. Could an Australian property price crash really happen? Of course it could happen. I imagine many Australians locked out of the housing market would be hoping it does—such is the wealth divide between the property haves and property have-nots.
While Australia’s unemployment rate is trending lower, the nation’s underemployment rate — which includes the unemployed and people in employment looking to work more hours — remains elevated, and it’s placing downward pressure on both wage growth and inflation. That’s the view of ANZ’s economists, who suggest underemployment in Australia is now “widespread”. “Our analysis also shows that a high level of underemployment – which captures those workers who want to work more hours – is also weighing on wage growth,” wrote the bank in a Friday research note. “Underemployment is widespread and has been slow to respond to the pick-up in the non-mining economy. “For example, the unemployment rate has fallen from a peak of 6.3% in Q3 2015 to 5.8% in Q2 2016, while the underemployment rate has remained unusually high, down only 0.1pp from 8.5% to 8.4% over the same period,” it adds.
The strength of Australia's jobs market is being overstated by a surge in casual positions and an inability by workers to secure more hours. While the unemployment rate fell to 5.7 per cent in July from 6.3 per cent a year earlier, 87 per cent of the jobs created in that period were part-time: a definition that covers anything from 1 hour a week to 35 hours. At the same time, the underemployment rate is stuck near a record high of 8.5 per cent.