More than one million households will be in mortgage stress by March 2009

More than one million households could be in mortgage stress by March 2009 as higher living costs, falling house prices and rising unemployment levels affect households.

More than one million households could be in mortgage stress by March 2009 as higher living costs, falling house prices and rising unemployment levels affect households.

The Fujitsu Consulting Mortgage Stress survey reveals that levels of mortgage stress actually fell by 10% in September thanks to falling interest rates and tax changes. The number of households in mortgage stress fell by 10% to 800,000, while the number of people in severe stress fell by 19% to 256,000.

But Fujitsu Consulting predicts mortgage stress levels are set to explode, despite projections for further rate cuts, with rising unemployment, costs and debt levels set to increase the number of households in mortgage stress by 27% to more than one million.

The company is also predicting a 42% jump in the number of households in the “severely stressed” category.

Fujitsu Consulting managing director Martin North says the findings are “very concerning”.

“It shows that despite the potential for more rate cuts in coming weeks, the spectre of falling employment is offsetting the potential benefit. The double whammy of unemployment and higher cost of living are driving more people into stress. This will lead to further house price reductions in many suburbs.

“We found that households are continuing to refinance to try and escape stress, and over 30% of these transactions include paying down credit card debt. As a result, core equity is being lost to support current spending behaviour.”

The study also shows 15% of households have experienced overtime pay reductions in the last three months, while 35% of respondents employed by small business have had their hours reduced in the same period.

But it’s not just the battlers who are struggling. Fujisu claims “affluent stress” levels are rising, due to falling sharemarkets and inflation and says “sea change” suburbs are also being hit by forced sales as superannuation returns drop.

Related stories:

• Australia’s mortgage default hotspots
• Mortgage stress grows as credit crunch deepens