Which state do you think is under the most ‘mortgage stress’?

It’s not uncommon for the average Aussie household to feel financial strain, but according to new research by Digital Finance Analytics, ‘mortgage stress’ is at a record high.

The survey found that one in three Aussies with a home loan aren’t earning enough to meet their repayments and keep up with living costs.

“Households have larger mortgages, thanks to the strong rise in home prices, especially in the main eastern states, and now prices are slipping,” said Digital Finance Analytics Principal, Martin North. 

“Our surveys show that households are keeping their wallets firmly in their pockets as they try to manage ever-tighter cash flows.”

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Among the states, Victoria recorded the highest number of mortgage holders under stress at 266,960, however, this was 5,000 fewer than the previous month.  

New South Wales recorded a total of 264,740 financially stressed households - 400 more than last month. Meanwhile, Queensland sat at 172,080 - up almost 7,300 households. 

“Household debt continues to climb to new record levels — mortgage lending is still growing at an unsustainable two-to-three times income,” says North. 

“Households manage this deficit by cutting back on spending, putting more on credit cards and seeking to refinance, restructure or sell their home.”

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In October last year, Mozo research found that Aussies looking to refinance their home loan could save as much as $86,000 just by switching to a better value home deal. 

“With savings as high $86,000 for refinancers*, that’s a sign you should definitely be asking for a better deal when you approach your home loan lender,” said Mozo’s property and home loan expert, Steve Jovcevski. 

First home buyers on a tighter leash

And while Aussies across the nation tighten their purse strings, it seems that new buyers may also need to up their budget game to get into the property market. 

New data from UBS has revealed that the maximum borrowing capacity for owner-occupiers and investors has dropped by 10% and 20%, respectively. 

To calculate the data, UBS used mortgage calculators from the big banks to compare borrowing capacity from 2015 to the present day. 

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“In 2015, an owner-occupier household with $120,000 income, around $36,000 in expenses, a $9,000 car loan and $4,000 credit card limits had a borrowing capacity of around $618,000. This implies a debt-to-income of around 5.3 times,” said Jonathan Mott, Research Analyst at UBS. 

“Today, that same family now has an assumed living expense of around $41,000. The borrowing capacity is now $571,000 which implies a debt-to-income of around 4.9 times.”

The research went on to state that should lending criteria become even tighter for first home buyers, it would likely impact property prices across the market. 

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If you’re an Aussie who thinks they could be on a better home loan deal, check out our home loan comparison tool for some of the latest refinance offers on the market.

*Savings and discounts based on discounts from ANZ, NAB, Westpac and CommBank between 11-14 September 2017. Potential annual savings calculated for refinancer on a $500,000 loan over 30 years.