Mortgage Stress Hits Australia’s Hot Spots

Although the rate of mortgage defaults: or mortgage stress as the Australian Press likes to call it is nothing like the overseas rates it is on the way up in Australia.

The western suburbs of Sydney have been Australia's hotspot for mortgage stress for sometime but the latest report from Fitch Ratings has three new areas which have rapidly increased their level of mortgage defaults. These include the Gold Coast, Regional NSW particularly Gosford, Woollongong and Newcastle, and last and somewhat surprisingly, eastern metropolitan Perth.

Loan defaults have jumped 50% in the last six months to September. That is an impressive percentage increase but in fact the rate of mortgage default has jumped from 1.4% to 2.1% so the actual rate is still laughably low from a North American or European perspective.

Unfortunately this is possibly just the start for Australia. Although petrol prices are dropping by the day and the mortgage interest rates are coming down nearly as fast, the concern is that unemployment will start to rise, and the usual will rapidly hit the air conditioner as Australians are one of the world's biggest consumers of personal debt. The effect in Western Australia and the mortgage belts of eastern and southern Perth could be particularly significant. Many of the people who have been earning six-figure salaries in the mining industry are some of the first to be affected if China stops buying. Exploration and contract services companies are already seeing contracts and funding disappear. Those that thought earning $100,000 / year gave them ability to spend $120,000 year are now about to find that a debt driven lifestyle really isn't a smart move in an economy driven by the fickle mining industry.

The jobs will come back, the problem is that most people can't afford to be without a paycheck for even one month never mind five or six.

Dunsborough, WA: Sale Sign

In the meantime there is one spot of good news in this gloomy picture. Signwriters are doing well out of the softening market. Trident Signs is reporting they erected a total of 1351 signs in October, a significant increase over the 975 of the pervious month. And the signs are getting bigger, and the real estate agents want two or three signs per a property. Sign writing anyone?

Photo Credit: Australia News