Negative equity set to invoke mortgage stress

Rising unemployment will force one million households into mortgage stress by March next year says Fujitsu consulting. Expected big interest rate cuts are not expected to stop the growing level of financial distress. Falling house prices are expected to exacerbate the situation property forecast to fall by 20 to 25 per cent on average over the next year. Fujitsu consulting managing director Martin North said people are able to exit the property market in an orderly way now by selling but that may not last if prices drop below loan levels and owners are prevented by negative equity from selling their homes. Morgan Stanley also expects property prices to fall by 20–25 per cent while University of Western Sydney economist Steve Keen is predicting a 40 per cent drop in residential property markets.

Source: The Australian Financial Review