Early mortgage hardship boosts repayment recovery: Experian

Experian has published analysis showing that mortgage borrowers who seek hardship support before missing repayments are more likely to return to a stable repayment position. It found that 87% of those borrowers were back on track within six months of their temporary hardship arrangement ending.

The findings come from Experian's latest Business Pulse Monthly, which examined anonymised, aggregated Australian credit bureau data through May and tracked repayment outcomes after temporary hardship support ended.

Borrowers who entered hardship arrangements while still up to date on their mortgage repayments recorded the strongest recovery rates. Outcomes weakened as borrowers sought support at later stages of financial difficulty, with those already in arrears less likely to return to an up-to-date repayment position within six months.

The data adds to a broader picture of financial strain across Australian households, as rising living costs continue to affect cash flow and spending choices. Experian's report suggests the point at which customers ask for help can shape their likelihood of recovery once temporary support measures are withdrawn.

Louis Tsang, Head of Analytics Consulting & Insights at Experian, said the pattern was clear in the analysis.

"Our analysis shows 87% of borrowers who entered hardship while still up to date returned to a stable repayment position within six months, a materially stronger outcome than for those who sought support after falling into arrears. For lenders and portfolio teams, the key is to understand a customer's repayment position alongside the broader economic environment to identify financial stress early and tailor support to achieve better customer outcomes," Tsang said.

The report also pointed to shifts in consumer spending, with discretionary spending, adjusted for inflation, rising 8.1% year on year and essential spending increasing 6.0%. Buy Now, Pay Later spending rose 54% from April last year, signalling changing payment behaviour as households juggle day-to-day costs.

Outside the consumer sector, the figures showed a mixed environment for businesses. There were 1,104 company insolvencies in May, down 16% from a year earlier, though conditions varied sharply by industry.

Mining continued to record elevated insolvencies, while food services showed signs of stabilising. Company gross operating profits fell 1.3% over the March quarter, although they remained 3.2% higher than a year earlier.

Sector pressures

Payment performance remained under pressure in several parts of the economy. Hospitality business-to-business payment delinquencies deteriorated further, with 14.2% of the sector 60 days or more overdue on trade payments and invoices.

Construction also remained under strain, while healthcare payment performance improved. The divergence reflects how unevenly higher costs and softer conditions are being absorbed across the economy.

Housing signals

Mixed housing indicators accompanied the business and consumer data. National home prices eased 0.1% in May, driven by declines in Sydney and Melbourne, while Perth and Brisbane continued to post gains.

Consumer confidence improved ahead of end-of-financial-year sales, but business confidence was largely unchanged. Together, the figures point to a domestic economy in which sentiment has recovered in some areas even as repayment stress and late payments remain evident.

For lenders, the mortgage hardship data is likely to sharpen attention on early warning signs of stress. The report indicates that repayment status when support begins is a strong marker of later outcomes, which could influence how banks and other lenders identify customers for intervention.

Experian based the mortgage findings on Australian credit bureau data, saying the results reflected broader market trends rather than individual borrower profiles. The analysis focused on temporary hardship arrangements and whether borrowers had resumed an up-to-date position six months after those arrangements ended.