Poorer People Struggle To Pay Mortgage

The Age

Saturday October 13, 2007

Nassim Khadem, Economics Correspondent, Canberra

LOW to middle-income earners nationwide are the worst affected by mortgage stress, and Victorians on incomes of $35,000 or less are the worst hit by rental stress.

Figures from the Bureau of Statistics show there are more than 1.2 million households in housing stress, with one in two first home buyers now spending 30 per cent or more of income meeting mortgage repayments.

The figures found about 683,000 households in mortgage stress and 561,000 in rental stress - slightly higher than the 2006 census figures.

Analysis of the ABS Survey of Income and Housing 2005-06, shows about 312,000 households nationally on incomes of $35,000 to $70,000 are in mortgage stress - the largest group spending 30 per cent or more of income on mortgage repayments.

Compare this to about 100,000 households who earn more than $100,000 annually in mortgage stress, and who are the category generally choosing to spend more of their income on meeting repayments.

In Victoria, there are about 90,000 households, or 40 per cent, on incomes of $35,000 to $70,000 in mortgage stress - the second highest number after New South Wales.

The figures do not include the impact of four interest rate rises between 2006 and 2007, which would increase those in stress, and which has become the focus of much of the recent political debate on housing affordability.

Although the figures are based on income and do not account for people's assets, only 7 per cent of households in stress nationally also had an investment property.

Chris Lamont, the Housing Industry Association's policy director, said the Reserve Bank's argument that higher debt levels needed to be viewed in the context of people's assets also rising, did not apply to low-income households.

"It would certainly be the exception for someone earning $50,000 a year to have $1 million worth of assets sitting idly by, and there's no advantage in holding debt in your principal place of residence," he said.

The figures also show rental stress has grown, with those earning $35,000 or below the group most likely to spend 30 per cent or more of gross income on rent. Nationally just over one in two households in this income group are affected. Victoria has 141,000 low-income households in stress, making up 62 per cent of purchaser households - a higher incidence than any other state.

While the bureau does not use the 30 per cent affordability measure - as some people inaccurately report income reimbursements such as rent assistance and some voluntarily choose to spend more of their income on repayments - the general definition of housing stress is 30 per cent or more of gross income spent on housing costs.

© 2007 The Age

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