While stress over being able to make mortgage payments has lessened over the past year in Australia, rent stress has ballooned, according to new research.
ME Bank’s latest Household Financial Comfort Report indicates that rent stress is at record levels. After polling 1,500 Australian households, the bank found that two out of three renters (67 per cent) were experiencing financial anxiety due to paying more than 30 per cent of their household disposable income to cover rental payments.
Almost one in five renters (19 per cent) said they were under extreme rental stress, with more than 60 per cent of their household income going towards rent.
A year ago, while rent moratoriums were still prevalent and markets were not as tight, that number was just 12 per cent.
ME Bank’s research also indicated that rents are rising faster than disposable incomes, with the average proportion of disposable income spent on rent increasing to 42 per cent – a 2 per cent rise over the past six months.
Meanwhile, mortgage stress seems to have somewhat subsided over the course of the last 12 months; 35 per cent of mortgagees reported paying more than 30 per cent of their household disposable incomes on repayments, compared to 42 per cent in June 2021 and 37 per cent a year ago.
The bank, which ranks financial comfort on a scale out of 10 (with 10 being the most comfortable), determined in this latest round of research that households with a mortgage or who own their house outright are both at near-record comfort levels of 5.96 and 6.91, respectively. Renters, meanwhile, logged a score of 4.78.
The increasing level of comfort among property owners has likely been a contributing factor to overall financial comfort rising across the country.
ME Bank, which has been tracking feelings of financial security among Australians for the past decade, reported that ultimately, the country’s comfort was at an all-time high. Broadly, they found that respondents were 3 per cent more comfortable than in the 12 months prior and 8 per cent higher than levels recorded in December 2019.
But ME’s consulting economist Jeff Oughton noted that many of the factors contributing to this comfort were on shaky ground.
“On the surface, the financial comfort of the average Australian looks better than ever, but it’s fragile – and has begun to fall for many households – especially those with low comfort,” he noted.
“The rising cost of necessities (such as rent, food, fuel etc) combined with fixed or stalling income gains and the long-term impacts of COVID-19 is causing financial worry among many households,” he added.
ABOUT THE AUTHOR
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.