The number of Australians experiencing mortgage stress could rise sharply over the next few months, though only if interest rates rise again. A mortgage industry survey by JP Morgan and Fujitsu Consulting released yesterday estimates that 70,000 households are suffering severe mortgage stress, which means that they are having difficulty making regular mortgage payments, face a significant risk of default or have commenced a forced sale.Another 171,000 are experiencing mild stress, which means they are not at risk of defaulting but are having to cut discretionary spending to pay the mortgage.The authors of the report assume that interest rates (the RBA cash rate) will rise by 25 basis points by the end of the year and that lenders will re-price their prime loans by an average of 15 basis points to compensate for the increased cost of funding. Higher risk loans will be re-priced by an average of 200 basis points.If that scenario is played out the number of households suffering severe stress will rise to 113,000 and the number experiencing mild stress will rise to 488,000.Fujitsu Australia and New Zealand managing director of consulting, Martin North, said stress would not be confined to groups who usually struggle with their home loans - the battlers, rural families and young first home buyers. North said: "The suburban mainstream is the most adversely affected by this trend."JP Morgan banking analyst Brian Johnson said the re-pricing of loans would not be uniform across the mortgage industry. "Commonwealth Bank still funds more than half its lending to households with household deposits. It is the least affected by what is going on in credit markets. "The other major banks are around 30 per cent. The Commonwealth and Westpac have not said mortgage rates will have to rise. ANZ and NAB have. "For the past decade we have seen CBA and Westpac lose market share. Now they are looking to take share back. "They will not re-price and that will put competitive pressure on ANZ and NAB. For the first time in a long time it becomes really important who you borrow from."Johnson said lending standards remained sound in Australia, compared with practices in the US. The weakness in the local system has been the willingness of financial institutions to issue credit cards. The report calculates that the average number of months of disposable income held on credit card balances has risen from less than one month in the early 1990s to three today.The report said: "While the growth in credit card balances is alarming in its own right, it plays a significant role in delaying the overall transmission mechanism for mortgage stress to bank profitability."North said the main cause of stress was the continuing deterioration in housing affordability.House prices have grown at a compound rate of 8.9 per cent a year over the past five years. During the same period the compound growth rate in disposable income has been 2.9 per cent a year. Initial loan to valuation ratios have risen from an average of