Loan Stress - one third of Australians are risking loan default.....

Its been a year since the credit crunch hit Australia, which sparked a rapid drop in interest rates and government stimulus spending. Recent research is pointing to a significant number of Australians facing mortgage stress & loan defaults in the face of rising interest rates & unemployment.

As would be expected from the drop in interest rates, according to Fujitsu, the number of people experiencing some degree of mortgage pain is 561,000 down from 900,000 in August last year. Sounds like its all roses. However, reviewing the month by month statistics of the past month, the number of people experiencing mortgage stress has risen 2.4%. The number of people experiencing severe mortgage stress has risen 14% with the effects of the governments stimulus package now wearing off. Couple this with a decline in the number of hours worked & rising unemployment, we are begining to see the the start of another cycle.

In an interesting article published by the Australian, it was revealed that one third of the country have entered into financial distress despite the positive economic signs for the country. In a post code analysis of distres, it was found that of the top 50 households in distress, 29 are in the First Home buyers belt including the Western suburbs of Sydney. Research also revealed the slippery slope of defaulting on payments. It often begins on small household bills but quickly followers onto defaults for Financial Services. Further research showed that Consumers with outstandig defaults are six times as likely to default as consumers with no defaults, and consumers who have repaid outstanding defaults are 3 times as likely to default again compared to consumers who have not defaulted.