Mortgage stress Australia
Mortgage stress in Australia has reached a 15 year high. Image: Canva.
  • 29.2% of Australian mortgage holders are at risk of mortgage stress.
  • To be at risk, 25% to 45% of household income after tax goes into repayments.
  • Inflationary pressures may force the RBA to lift the cash rate for the 13th time this year.

Almost one and a half million Australians are now at risk of mortgage stress, representing a sizeable portion (29.2%) of mortgage holders, according to new research from Roy Morgan.

To be considered at risk, mortgage holders will be spending 25% to 45% of their after-tax household income on their home loan, depending on their income and spending.

Mortgage stress – owner occupied mortgage-holders


Morgan Roy mortgage stress figures
Source: Roy Morgan.

Roy Morgan CEO, Michele Levin, said the latest figures represent a significant increase of 642,000 from just a year ago.

The figures have also surpassed the previous record of the three months leading up to May 2008, wherein 1.46 million Australians felt the sting of mortgage stress.

Borrowers have been feeling burnt by this year’s climbing interest rates, and many of them are anxiously awaiting the possibility of a thirteenth interest rate hike when the RBA convenes in the first week of September.

Will interest rates rise a thirteenth time?

Roy Morgan forecasts an additional 81,000 mortgage holders to fall under mortgage stress if the RBA elect to increase interest rates by 0.25% in September. Should there be another rise of 0.25% in October, the number of at risk mortgage holders will rise to 108,000 more than present.

Although the RBA has elected to pause cash rate hikes in July and August, Levin says new inflationary pressures may see an end to the reprieve.

“During mid-August, the average retail petrol price in Australia increased to over $2 per litre for the first time since July 2022,” she said.

“The increases to petrol prices are being driven by a decline in the value of the Australian dollar, which has now dropped below 65 US cents to its lowest for nearly a year since November 2022.

“As long as the Australian dollar stays low and petrol prices stay high, and even increase further, there will be additional inflationary pressures in the economy.

“Therefore, 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.”

The largest impact on mortgage stress

Levine says the variable that has the largest impact on whether a borrower falls into the ‘at risk’ category is related to household income, which is directly related to employment.

Unemployment rate

Australian unemployment rate
Source: ABS.

Moreover, according to the ABS‘ Labour Force July report, the unemployment rate jumped 0.2 percentage points in July and the underemployment rate remained at 6.4%.

“If there is a sharp rise in unemployment, mortgage stress is set to increase towards the record high of 35.6% of mortgage holders considered ‘at risk’ in May 2008 during the GFC,” said Levin.

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