Analysis of the Digital Finance Analytics’ survey data has revealed mortgage stress across the country is shaping as a major federal election issue, with some electorates recording nearly 70 percent of households in stress.

The analysis outlines 12 suburban areas of Sydney and Melbourne where the combined total of financially stressed tenants and homebuyers now equates to more than half of all households. Four of these areas are electorally marginal, with either party’s policy to mitigate mortgage stress potentially swinging the election. 

Taken from a sample of 52,000 households in a number of electorates, the survey shows the overall proportion of mortgage holders struggling with their finances rising from 32.9 percent in February 2020, to 41.7 percent in July 2021. This increase in the number of people in financial crisis can be attributed somewhat to the COVID-19 pandemic.

The Macarthur federal electorate, located in the outer metropolitan area of Sydney recorded 68 percent of its households in mortgage stress. Chifley in New South Wales was second with 63.9 percent of homeowners experiencing mortgage stress, with Werriwa in outer metropolitan New South Wales recording the third highest amount of mortgage stress in the country with 61.4 percent. Both Macarthur and Chifley are recognised as safe Labor Party seats, with Werriwa regarded as a marginal seat.

Victoria’s highest rate of mortgage stress is recorded in the electorate of La Trobe. The seat is marginal, with 57.9 percent of homeowners claiming mortgage stress. No South Australian, ACT, Queensland or Tasmanian electorates placed in the top 12, with Western Australian electorate Pearce, located in the outer metropolitan area of the state ranking at eighth on the overall list, with 54.6 percent of its inhabitants under mortgage stress, in the safe Liberal/National Party seat.

A new report from UNSW’s City Futures Research Centre argues Australia’s housing system needs to be stabilised. Report Lead Author and UNSW Professor Duncan MacLennan says the levels of household debt have reached dizzying highs.

“With house prices and mortgage borrowing once again surging in 2021, Australia’s household household debt is now at a record national high,” he says.

“It’s especially concerning that all Australia’s major banks have internationally high residential mortgage exposure. That means Australian households and the overall financial system have become highly exposed to interest rate change rates and external economic shocks.”

“If the housing market takes a hit from future economic instability, a boost to social and affordable rental would soften the downturn for the entire economy.”

The UNSW report finds that, relative to GDP, Australia’s household debt rose from 70 percent in 1990 to a staggering 185 percent in 2020. Three quarters of this debt is attributed to mortgages, with 60 percent of debt held by Australian banks being residential mortgages, one of the highest globally and greatly exposing the banking system to potential disruption.

The report authors argue that a re-balanced and therefore less volatile housing market would reduce long-term reliance on intermittent ‘macro-prudential lending’ interventions. In achieving this, they advocate for a stronger Reserve Bank role in maintaining housing system stability as part of a more purposeful national government approach to housing market management.

“One of the biggest concerns we have 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 has minimal interest and the RBA states that it is outside its remit. Meanwhile, Australian banks and households are gambling everything on the hope of continuously increasing prices,” says 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 must be expanded by state and federal governments.

“Whether for owners or renters, Australian housing has seen tearaway growth in prices. At the same time, large swathes of the community have seen their livelihoods and income security collapse. Social and affordable housing is the missing piece of this jigsaw. Politicians of all political persuasion must be prepared for housing inequality to emerge as a major federal election issue.”

To read the report in full, click here.