Queenslanders living in fear of losing their homes are racking up credit card debt to the highest level since Covid in order to meet mortgage repayments as the cost-of-living crisis worsens.
New figures show the risk of credit card holders defaulting in the next 12 months has increased in the past year, and the number of stressed households using cards to pay their mortgages has doubled since 2022.
Exclusive research from credit score company, Experian, reveals credit card stress is surging due to higher home loan borrowing obligations, the financial needs of children, and potentially large business borrowings.
New figures show the risk of credit card default in the next 12 months has increased in the past year, and the number of stressed households using cards to pay their mortgages has doubled since 2022.
RELATED: Drowning in debt: Qld mortgage stress hotspots exposed
And, it’s not just lower income earners who are flashing the plastic, with the research showing those earning $250,000 a year were as much at risk of default as those on $90,000 a year because of higher than average debt obligations and higher expenses.
Barrett Hasseldine, head of modelling at Experian, said while credit card stress had gone up over the past quarter, missed payments on home loans had improved, which either meant more credit card holders were renters or more homeowners were relying on credit to pay their mortgages.
“Brisbane has been hit particularly hard by rising costs, with inflation sitting at around 15 per cent higher than the national rate,” Mr Hasseldine said.
“That’s being driven mainly by increases in rent, electricity and medical services costs.
![Credit card debt - portrait of a young woman pulling her hair with stress over her bills.](data:image/svg+xml,%3Csvg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 1280 720"%3E%3C/svg%3E)
New data shows Queensland recorded a fall in mortgage default risk in the past quarter, but its credit card holder default risk had increased.
MORE: Revealed: Suburbs where landlords are hit the hardest
“(Credit cards and personal loans) definitely will be helping them to meet those mortgage requirements.”
The Experian data shows Queensland recorded a fall in mortgage default risk in the past quarter, but its credit card holder default risk had increased — up 2 per cent in a year, which is slightly higher than the national average.
“(These insights) are showing the greatest, most elevated level of credit stress among consumers since Covid,” Mr Hasseldine said.
Cost of living and rent and mortgage stress is prompting more people to turn to credit cards and personal loans to make ends meet financially.
MORE: Worst suburbs for mortgage arrears revealed
“That in itself was something that we had hoped we had seen the worst of, and as interest rates are starting to come down again, hopefully there’s some of that easing pressure, but we’re not seeing the full effect of that yet.”
RBA statistics released this month show the total value of personal credit card transactions rose in August by $679 million — or two per cent — to the highest level recorded since reporting began in January 2002.
Canstar data insights director Sally Tindall said credit card debt attracting interest was on the rise in general, although data from the big four banks did not indicate a significant rise in credit card debts more than 90 days overdue.
Canstar Data Insights director Sally Tindall. Picture: supplied.
“It might not look like a cause for alarm, but often people will prioritise paying their mortgage over their credit card debt because of the fear of losing their own home,” Ms Tindall said.
“During those 13 RBA hikes… we were always amazed at how little the (mortgage) default figures nudged up by, but people place a priority on paying the mortgage because they see it as one of the most important bills to pay.”
Ms Tindall said while credit card debt attracting interest dropped in July in line with previous years because of tax returns, it was concerning to see the debt rise again so quickly in August.
“It’s not normal to see it pop back up so quickly, particularly heading into the Christmas season,” she said.
This four-bedroom house at 7 Grenda St, Kearneys Spring, in Toowoomba, is on the market for $1.035m. Toowoomba has the highest mortgage and rental stress in the state.
Separate research from Digital Finance Analytics shows Toowoomba has the highest mortgage and rental stress in Queensland, with three quarters of the city on average struggling to meet payments.
Pine Mountain, Geebung, and Ipswich were the next worst suburbs for mortgage stress, while renters in Southport and Coomera on the Gold Coast are doing it the toughest.
Digital Finance Analytics data scientist and banking analyst Martin North said mortgage and rent stress was being driven by bigger mortgages, the rising cost of bills, insurance and health costs, food prices, along with school fees.
Martin North is the CEO and founder of Digital Financa Analytics which looks at housing finance and other economic indicators. Photo: Hollie Adams.
Mr North said about three per cent of stressed households were using credit cards to pay their mortgages — double that from 2022.
“Incomes are still stagnant despite more households with two-plus incomes and overtime,” Mr North said.
“Plus, time, as savings are drained away as people stay in this stressed state for longer, putting more pressure on their finances, causing them to grab additional loans, even buy-now pay later and pay-day loans to get by, as well as credit cards — all putting more interest repayments on their shoulders.
“If you talk to debt counsellors, as I do, they tell us that some (people) are grabbing more loans.”
As costs continued to rise, Mr Hasseldine said the rise in credit stress was likely to continue unless there was significant cost of living relief.
He said another interest rate cut would “absolutely help” mortgage holders stay on top of their repayments, but it was no silver bullet.
“That does mean though that spending increases again, which could lead to rental prices going up again more quickly and the cost of goods going up more quickly again, increasing (financial) stress,” he said.
