Victoria ranks just behind NSW in the number of mortgage-stressed households, according to a report.

The picture of a mortgage repayment crisis gripping the State shows Victoria just behind NSW in the number of defaults.

NSW defaults rose to just above 4% while Victoria's grew to just under 4%, according to the Anatomy of Australian Mortgage Stress.

Fujitsu Consulting, which prepared the report, to be released on Thursday, said that 750,000 households nationwide will be under mortgage stress by mid-2008, with nearly 300,000 under severe stress.

Interest rate rises are blamed for much of the pain as the mortgage rate resets with each increase.

"Currently, for every 25 basis point rise in interest rates we expect to see an additional 150,000 households slip into mild stress and 75,000 move from mild stress to severe stress," the report stated.

It defined "severe stress" as  falling behind on payments, considering selling or going into default.

In Victoria, young growing families are expected to experience some form of stress, mostly mild.

The consulting group estimated a 228% jump in the number of households were hit with mild mortgage stress, while total mortgage stress for growing young families would rise 120%.

Another significant change is that the amount of suburban mainstream households expected to encounter severe stress by September is expected to nearly double. Suburban mainstream households are defined as a mix of blue and white-collar families, many with children.

The disadvantaged fringe segment, or low-income dwellers in urban and country areas, are expected to see their numbers in the serve mortgage stress segment surge 81%.

This year alone, the February and March rates rises by the Reserve Bank added about $110 in monthly repayments for a standard $300,000, 25-year mortgage.

Western Australia, undergoing a surge in inflation from its resources boom, was the clear leader when comparing the proportion of homes in severe stress against populations and household numbers. WA was followed by NSW and Victoria.

The report predicts continued rises in mortgage stress during 2008.

The Age April 22nd 2008