Mortgage stress on the rise in NT

The number of Northern Territory households suffering mortgage stress has jumped since May last year with more than 40 per cent of mortgage holders feeling the pinch, however conditions have eased in the capital.

Mortgage stress has eased in Darwin (pictured) but crept up in other parts of the NT. Picture: Che Chorley

The number of Northern Territory households suffering mortgage stress has jumped since May last year with more than 40 per cent of mortgage holders feeling the pinch, however conditions have eased in the capital.

Exclusive new analysis by Digital Finance Analytics (DFA) found 9,946 of 23,963 borrowing households in the NT were experiencing mortgage stress at the end of October.

That equates to 41 per cent of Territorian mortgage holders, up from 35 per cent in May 2022.

Mortgage stress was defined by DFA as homeowners spending more on their repayments and other living costs than they were earning.

DFA principal Martin North, who has been tracking the income and debt from a rolling sample of about 52,000 households since 2001, said a perfect storm of rising borrowing costs, stagnant wages and rising home prices had made homeownership challenging for many.

CEO and founder of Digital Finance Analytics, Martin North. Picture: Hollie Adams

But Mr North said the RBA “must kill off inflation” or risk financial pain for longer.

“The longer interest rates and inflation stay high, the more stressed households will decide to sell, or will drift into default,” he said.

In Darwin, there was a drop in the number of borrowing households experiencing mortgage stress in October, down to 20 per cent from 23 per cent in May 2022.

However, in Palmerston nearly half of mortgage holders were struggling to keep up, with 47 per cent under stress, up from 34 per cent in May last year.

Litchfield saw a huge jump with 49 per cent of the 2,994 borrowing households experiencing mortgage stress, up from just 18 per cent.

In Alice Springs, 68 per cent of households servicing a mortgage struggling, however that figure had dropped from 71 per cent in May 2022.

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Darren Hunt, of Real Estate Central, said from what he was seeing as a Darwin-based real estate agent, the current financial climate was having more impact on buyers than owners.

“It’s harder to get into the market at the moment,” he said.

“Of those that have mortgages, we’re not really seeing them become distressed sellers.

“People by and large will do everything they can to hold onto their property and banks will work with people, too.”

Mr Hunt said he estimated about one in 10 contracts in the wider Darwin region were falling over due to finance.

“We do see finance becoming a larger issue in recent times,” he said.

“We’re seeing it more in the younger buyers without assistance from the bank of mum and dad.

“But most buyers are pretty organised and have their finances in order before making an offer.”

Darren Hunt of Real Estate Central. Picture: realestate.com.au

The real estate veteran said Darwin wasn’t feeling the pinch of interest rate hikes as much as southern cities due to the stability of the local property market.

“Darwin is still the most affordable capital city in the country,” he said.

“The property market is remarkably stable and it’s quite contrary to what it has been previously.”

The DFA analysis showed almost 2 million Australian households were experiencing mortgage stress.

From a total of 3,857,058 borrowing households, 1,931,874 were considered stressed, with another 201,968 at risk of joining their ranks on the back of another 0.25 percentage point increase to official cash rate of 4.1 per cent.

RateCity.com.au research director, Sally Tindall recently warned the big four banks were now all in agreement that a 0.25 percentage point increase was likely next week.

“A rate hike of 0.25 percentage points would take Australia’s cash rate to the highest level since November 2011 and put many borrowers in a tricky position,” she said.

She warned that a rate hike could potentially hit borrowers next month as well.

The Reserve Bank of Australia hiked interest rates 12 times since May 2022 but held off on any further increases for the past four months.