Australians at risk of mortgage stress at record high
A record number of Australians are suffering from mortgage stress as the Reserve Bank’s series of interest rate rises continues to hit home.
Research from Roy Morgan showed 1.5 million mortgage holders (29.2 per cent of the total) were “at risk” of mortgage stress in the three months to July 2023.
That period included two interest rises of 0.25 per cent, pushing the cash rate to 4.1 per cent in June.
The figures for July represented a new record high and surpassed the previous record high number reached in the three months to May 2008, of 1.46 million, Roy Morgan said.
That was during the Global Financial Crisis.
The number of Australians at risk of mortgage stress has increased by 642,000 during the last year as the RBA increased interest rates at 12 of the board’s last 15 monthly meetings to the highest level since May 2012.
And the number of mortgage holders considered “extremely at risk”, has now increased to 1.017 million (20.3 per cent) which Roy Morgan said was “significantly” above the long-term average over the last 15 years of 15.4 per cent.
And further rate rises would pile more pressure on mortgagees, the research found.
More than 30 per cent of mortgage holders would be “at risk” if rates increase by 0.25 per cent next month.
And that would rise again – from a potential 30.2 per cent to 30.7 per cent (1.6 million) – with a subsequent lift in October.
Roy Morgan determines mortgage holders to be “at risk” if their mortgage repayments are greater than a certain percentage of household income – depending on income and spending.
“Extremely at risk” mortgage holders are in a situation where even the “interest only” is over a certain proportion of household income.
Unemployment is the factor which has the largest impact on income and mortgage stress.
“Although many have suggested the RBA has finished its cycle of interest rate increases, the low Australian dollar and high petrol and energy prices adding to inflation may force their hand for further interest rate increases in the months ahead,” Roy Morgan CEO Michele Levine said.
“The latest figures on mortgage stress show that rising interest rates are causing a large increase in the number of mortgage holders considered ‘at risk’ and further increases will spike these numbers even further.
“If there is a sharp rise in unemployment, mortgage stress is set to increase towards the record high of 35.6 per cent of mortgage holders considered ‘at risk’ in May 2008 during the GFC.”
Although more mortgage holders are considered “at risk” than during the GFC, the proportion is currently smaller given the larger pool of homeowners.
