As noted in a recent industry business article from ‘Mortgage Business’ Josh Needs:-
"Consumer and commercial credit bureau illion has released a new report that suggests credit stress resulting from inflation and rising interest rates has not yet peaked. In its Australia’s Credit Stress Barometer report for September 2023, released today (17 October), illion found that credit stress had continued to rise throughout the first half of 2023 and warned that the pain will only grow if interest rates remain high for the foreseeable future. According to the company, its Credit Stress Barometer utilises a metric showing the percentage of consumers at risk of defaulting on their agreement. The forward-looking prediction of this default risk utilises a trend line, showing the changing nature of credit stress, both directionally and in magnitude".
"The barometer is created by modelling the risk of credit default from a range of consumer data, including:
Current and historical credit performance.
Current and historical credit demand.
Financial exposure to different types of credit products.
Demand for credit in various industry risk sectors"
The September report revealed that the credit default risk of Australian consumers had risen 11 per cent in the year to June 2023, with the current trend suggesting that “credit stress is continuing to climb with no clear improvement in sight yet”.
"The credit bureau found that the rate of deterioration in the second quarter of 2023 – 5 percent – was “outstripping that seen over 2022 – 4 percent".
Causes of the accelerating credit stress included substantially higher overdue repayments on “revolving and consumptive credit (credit cards, consumer loans, and student loans)”, a rising trend in overdue home loan repayments, greater demand for consumptive credit, higher rent obligations and “substantially lower saving balances”.
Entering the Christmas period where consumption generally increases , it will be very interesting to see how retail sales of products and services hold up, whether that be online or direct via shopfront.
The above ‘Credit Stress’ brings budgeting into focus, even more so as cost of living rises bite into families with mortgages. At COMPASS, we can always review and assist in tweaking your budgets whether that in general day to day living costs or mortgage review. As an example COMPASS lending & finance are at this present point looking at refinancing and restructuring a client’s home loan and completing some debt consolidation. The new home loan rate will be 2.04% below what they are paying now, or just on $5,000 p.a less. This will greatly ease their living position.
Contact Michael on 6583 2211 to discuss further.