Mortgage stress among fully employed professionals is expected to hit hard after Christmas, an ominous sign for banks, says a major credit bureau.
The number of young, professional and fully employed Australians reporting difficulties repaying loans has doubled compared with pre-pandemic levels in a “worrying” sign that higher mortgage rates are starting to hurt, according to credit bureau Equifax.
Mr James described the trend as “worrying” and said banks would be watching closely going into the Christmas season, especially given credit card spending also rose 31 per cent during the period.Equifax analyses data from banks, which provide the bureau with information on all borrowers and use its data to assess individual borrowers.
“It’s probably safe to say it’s a younger generation where we’re seeing the stress and the callout is a lot of people gravitate to a credit score to decide if someone is high-risk or low-risk. But what we are seeing is that it’s across the bands,” he said. Mr James said “comprehensive credit reporting” had included a “hardship” category since July, but even this failed to capture the growing stress in the system.
The Australian Banking Association is understood to be ramping up its focus on hardship as the banks collectively mull how to deal with expected difficulties meeting repayments as mortgage rates increase and the economy inevitably enters a slower period.
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