Sharp increase in mortgage holders with no equity

The latest research from Roy Morgan has found that 8 per cent of Australian mortgage holders have little or no real equity in their home.

This number has increased by 7.1 per cent in 12 months to 345,000 Australian home loan customers in August 2017.

The findings come from Roy Morgan’s Single Source Survey which is based on more than 50,000 interviews per annum, including more than 10,000 with owner-occupied mortgage holders.

“Over the last 12 months, there has been an increase from 311,000 to 345,000 in the number of home borrowers having no real equity in their homes. This represents a considerable risk, particularly if home values fall or households are hit by unemployment,” Roy Morgan Research industry communications director Norman Morris said.

“Other potential contributing factors to this increase in mortgage stress include borrowers maintaining debt for other purposes rather than paying off their loan and the use of interest only loans.

“If home loan rates rise, the problem would be likely to worsen as repayments would increase and home prices decline, with the potential to lower equity even further.”

The research found that mortgage holders in WA are most at risk, as 14 per cent have no real equity in their home.

Mr Morris said: “The mining boom and associated increase in housing demand and house prices in WA, followed by the slowdown in the mining sector in WA, and a decrease in house prices continues to see it [WA] having the highest proportion of mortgage holders faced with little or no equity in their home.

“If house prices decline further in WA and unemployment increases, then more mortgage holders will be facing a tough situation.”

While the majority of Australians with a mortgage have considerable equity in their home, Mr Morris said that speculation is emerging that the growth in house prices must soon come to an end, and when it does, so will the growth in home equity.

[Related: Investors continue to defy APRA curbs]

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