Could mortgage stress decide the next federal election?

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Analysis of the Digital Finance Analytics survey data revealed that mortgage stress across the country is emerging as a major issue for federal elections, with some voters registering nearly 70 percent of households under stress.

The analysis describes 12 suburbs in Sydney and Melbourne where the combined total of financially troubled tenants and buyers now equals more than half of all households. Four of these areas are electoral marginal, as either party policy to alleviate mortgage stress can tip the election.

Drawn from a sample of 52,000 households in a number of electorates, the survey shows that the overall proportion of mortgage holders struggling with their finances rose from 32.9% in February 2020 to 41.7% in July 2021. This increase in the number of people in financial situations The crisis can be attributed in part to the COVID-19 pandemic.

Macarthur’s federal electorate, located in the outer metropolitan area of ​​Sydney, has recorded 68% of its households in mortgage stress. Chifley, New South Wales, was second with 63.9% of homeowners facing mortgage stress. Macarthur and Chifley are both recognized as secure seats for the Labor Party, with Werriwa seen as a marginal seat.

Victoria’s highest mortgage stress rate is in the La Trobe electorate. The seat is marginal, with 57.9% of homeowners reporting mortgage stress. No South Australia, ACT, Queensland or Tasmanian electorate ranks in the top 12, with West Australia electorate Pearce, located in the state’s outer metropolitan area, ranking eighth. on the global list, with 54.6% of its inhabitants under mortgage strain, in the safe seat of the Liberal / National Party.

A new UNSW City Futures Research Center report argues that Australia’s housing system needs to be stabilized. Lead author of the report and UNSW professor Duncan MacLennan says household debt levels have skyrocketed.

“With house prices and mortgage prices soaring in 2021, Australian household debt is now at an all-time high nationally,” he said.

“It is of particular concern that all of the major Australian banks have high international exposure to residential mortgages. This means that Australian households and the financial system as a whole have become highly exposed to the rates of change in interest rates and to external economic shocks. “

“If the housing market is affected by future economic instability, a boost in social and affordable rental would ease the downturn in the overall economy. “

The UNSW report finds that, relative to GDP, Australian household debt has increased from 70% in 1990 to 185% in 2020. Three quarters of this debt is attributed to mortgages, 60% of debt held by Australian banks being residential mortgages. one of the highest in the world and significantly exposing the banking system to potential disruption.

The report’s authors argue that a rebalanced and therefore less volatile housing market would reduce long-term reliance on intermittent “macroprudential lending” interventions. To achieve this, they argue for a greater role for the Reserve Bank in maintaining the stability of the housing system as part of a more focused national government approach to managing the housing market.

“One of our biggest concerns is that the housing crisis always seems to be someone else’s problem. The Commonwealth Government sees it as something the market will fix, APRA only has minimal interest, and the RBA says it is outside its purview. Meanwhile, Australian banks and households are betting everything on the hope of continuously raising prices, ”said report co-author Professor Chris Leishman of the University of South Australia.

Kate Colvin, national spokesperson for the Everybody’s Home campaign, says social and affordable housing needs to be expanded by state and federal governments.

“Whether it is for homeowners or renters, Australian housing has seen tremendous price growth. At the same time, large sections of the community have seen their livelihoods and income security collapse. Social and affordable housing is the missing piece of this puzzle. Politicians of all political persuasions must be prepared for housing inequality to become a major issue in federal elections.

To read the full report, click here.


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