More than one in four homeowners has struggled to meet their mortgage repayments for at least some months in the past year, according to a report released by Genworth.
The bi-annual Genworth Homebuyer Confidence report, a measurement of homebuyers' and potential homebuyers' sentiment towards the mortgage market, has revealed a four per cent increase in Australians struggling to meet mortgage repayments from March of this year.
With this level of mortgage stress occurring in such a low interest rate environment, some homeowners and financial industry experts are concerned about a looming crisis.
In September, the Australian Prudential Regulation Authority (APRA) issued a warning to banks to not loosen serviceability standards as more and more borrowers flock to the market.
“Low interest rates can mask debt serviceability assessments, creating opportunities for borrowers to increase their leverage," it said.
“The resulting growth in demand for housing loans can also put pressure on housing lending standards as ADIs compete to maintain or increase their market share.”
Speaking to The Adviser, Gerard Heffernan from Tiffen & Co in Canberra said talk of the looming crisis is alarmist and he does not foresee a rising interest causing a major problem for the industry.
“Australians have always found ways of trying to meet our mortgage repayments," he said.
"The amount of foreclosures in this country is so low compared to others around the world, and my experience in the industry is that most borrowers do whatever they can to make repayments.”
Mr Heffernan said he has confidence serviceability calculations are adequate and take into account the borrower's personal position and the overall economic environment in assessing suitability for a loan.
“I think the serviceability calculations are fine, they are already taking future rate rises into account,” he said.
According to Mr Heffernen, it is, however, still important for brokers to talk to their clients to ensure they are informed.
“The advice we are giving at the moment as we are talking to our clients is that rates are low now but you have a 30-year loan, so you have to expect that over that period of time rates will go up at some point,” he said.
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