Both major parties are promising tax relief for low and middle income earners, which will be welcome news to the increasing number of households in mortgage stress. Australian household debt levels are pretty much at world record highs, and the debt has not come down with the falling house prices.

Researchers are now suggesting that nationwide mortgage defaults are the highest they’ve been in two decades. “We’ve never seen it as bad as it is.” according to Adrian Pisarski, executive director of peak housing and homelessness body National Shelter.

More than one million Australians, which is a third of all home owners with a loan, experienced some form of mortgage stress in March according to data analytics firm, Digital Finance Analytics. They estimate that there are roughly 66,700 households currently at risk of defaulting on their mortgages – the highest number in two decades.

“Mortgage delinquencies will continue to increase over 2019, because of high debt levels, subdued wage growth, the conversion of a large number of interest-only mortgages to principal-and-interest loans and declining house prices,” according to Alena Chen, a Moody’s Vice President and Senior Analyst.

The latest news is that auction clearance rates are inching up – perhaps a slight positive sign from an industry under siege. However, this is likely driven by a lower number of auctions. In Sydney, about 20 percent of homes that are up for auction are pulled from the market – which is about twice the rate of a decade ago.

With house prices declining, but household debt remaining high – It is not surprising to see many households under mortgage stress. Additionally, there is a proven link between house prices and consumer spending – with lower house prices likely already translating into lower consumption. Lower consumption is also likely to lead to lower wage growth – exacerbating the mortgage stress problem.

Many households will be hoping that the budgetary surplus leaves scope for further help to be extended to the many Australians currently experiencing housing stress. In this environment it is unsurprising that the financial sector is currently under performing the wider market. However, if some sort of resolution can be achieved – there is a lot of territory for bank share prices to rise into.