Stress less about mortgages

Phil Naylor

Continual references to mortgage stress may have a damaging effect on the property market, according to the Mortgage and Finance Association of Australia (MFAA), which claims the real impact of such stresses are being overplayed.

MFAA boss Phil Naylor said that the term ‘mortgage stress’ has been grossly exaggerated beyond its definition, which the MFAA agrees to be a financial situation rendering a person unable to make mortgage repayments.

“Continual references to ‘mortgage stress’ generates unrest and uncertainty for borrowers and people in the market for property; we believe this to be alarmist and counter productive,” he said.

The Australian Bureau of Statistics (ABS) defines housing stress as existing when 30 per cent of gross family income is committed to housing costs, but the MFAA said it is an overstatement to suggest that all families in that position are having difficulty with their mortgages.

Despite significant increases in home loan repayment defaults recently, the MFAA said the percentage of mortgages in arrears is comparable with figures from the past few decades, which may be a more reliable indicator of mortgage stress. ABS figures show that 0.22 per cent of all mortgages are in arrears by more than 90 days.

“No one likes increases in loan repayments and the impact these have on our hip pocket, and MFAA’s own consumer research shows that a proportion of people find adjusting their budget to accommodate rate rises uncomfortable, and some may even find it stressful. But ultimately, if you are still in a financial position to make your repayments, you can not be classed as suffering mortgage stress,” Naylor said.