The housing market may be experiencing a cool down but Australian households facing mortgage stress is still high, according to a ME Bank survey.
For those with home loans, roughly 45 per cent of households reported to be contributing more than 30 per cent of their disposable income towards mortgages across the past six months.
Mortgage stress generally equates to spending 30 per cent or more of your income on your home loan repayments.
As a result, ME's bi-annual Household Financial Comfort Index, which surveyed 1500 Australian households, revealed housing stress was still widespread amongst Australian households.
This month, a Moody's report said Australian mortgage delinquencies were expected to increase thanks to a record number of interest-only mortgages due to switch from interest only loans to principal and interest loans.
In good news for renters, ME consulting economist Jeff Oughton said financial stress had lessened for this group over the same period.
“Thanks to the housing market cooling and rents falling,” Oughton said.
“While almost three-quarters (72%) of renters were previously contributing over 30 per cent of their disposable income towards rent, this number dropped significantly to two-thirds (67%) in the most recent survey.”
Related: RBA Calls for the Careful Monitoring of Household Debt
Household comfort worsening
Limited income gains combined with rising living expenses caused Australian households to overspend and dip into their savings, the ME report reveals, as a result the overall index remained stagnant.
A rising number of households expected they wouldn't be able to meet required minimum payments on their debt in the next six- to 12 months, increasing from 38 per cent in December 2017 to 43 per cent.
Australian households with mortgages only on investment properties, or who owned their homes outright recorded higher household financial comfort than households with mortgages on their home and an investment property and, to a greater extent, households with only a home mortgage.
This may reflect that households with investment loans generally tend to have both higher incomes (before and after tax) as well as higher (net) wealth, according to the index.