The JP Morgan and Fujitsu Consulting monthly consumer survey has found around 300,000 Australian households are suffering from severe levels of mortgage stress.
Speaking with Mortgage Business, Fujitsu Consulting’s Martin North says that for sufferers of severe mortgage stress – those needing to refinance or sell their homes – the future looks quite bleak.
“All 300,000 households suffering severe mortgage stress are not necessarily going to default; however some of these households will and with the pending interest rate rise set to occur [today] the situation doesn’t look encouraging,” he says.
Increased stress on borrowers will spell a difficult year ahead for the mortgage industry, says Australian First Mortgage’s (AFM) director of sales and marketing Iain Forbes.
“To think that interest rates will rise further is a concern for the whole country,” he says. “It is a concern for every household, every lender and AFM.”
Origin head James Brooks admits that the wholesale funder will be keeping a very close eye on borrower stress but at this stage has not noticed any significant changes from previous months.
“People may be tempted to shop around for cheaper loans,” he says, “and we could see a shift in borrowers looking to online providers who may have lower fees.”
If mortgage managers want to protect their loan books, Mr Brooks says they may need to look at restructuring their loans.
“There’s certainly no room to move with rates so they’ll need to look to other areas such as offering interest-only loans to help borrowers get by,” he says.
Mr Forbes advises industry peers to be prudent with budgeting and to watch their bottom lines.
“For a business trip fly economy, not business class, and spend your advertising dollars carefully,” he says.
Mr Forbes also suggests mortgage businesses monitor human resource costs by looking at recruitment expenses, linking salaries with productivity and thoroughly considering any wage rises.
“Every manager and lender needs to watch their spending – now is no time to be extravagant,” he says.
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