Research shows that 1.43 million Australians are at risk of mortgage stress
Mortgage stress is hitting over one in four borrowers. Image: Canva.
  • 28.7% of mortgage holders are 'At Risk' of mortgage stress.
  • Over 539,000 more households are struggling to pay their mortgage after a year of interest rate raises.
  • Australians 'At Risk' of mortgage stress could reach Global Financial Crisis levels.

Roy Morgan research estimates that 1.43 million mortgage holders were ‘At Risk’ of mortgage stress in the three months to June 2023. This timespan included two interest rate hikes of 25 basis points each, which saw the official interest rate rise to 4.1% in June.

This means that the number of mortgage holders ‘At Risk’ of mortgage stress is near record levels, but still below the May 2008 peak of 1.46 million.

Half a million more Australians at risk after a year of interest rate hikes

539,000 more Australians became ‘At Risk’ of mortgage stress over the past year as the Reserve Bank of Australia (RBA) raised interest rates twelve times. Interest rates in July 2023 are at an 11-year high of 4.1% in July 2023.

While there is a relatively high number of Australians who are ‘At Risk’ of mortgage stress at present, the numbers remain below the peaks of the Global Financial Crisis (GFC) in early 2008, which saw 1,455,000 Australians, or 35.6% of mortgage holders, become ‘At Risk’ of mortgage stress.

Roy Morgan predicts that the nation is on track to reach GFC levels of mortgage stress should there be more interest rate increases.

Mortgage stress – Owner-occupied Mortgage-holders

Mortgage Stress - Owner-Occupied Mortgage-Holders
Source: Roy Morgan.

Mortgage holders categorised as ‘Extremely At Risk’ have also risen to a record 943,000, or 19.6% of mortgage holders, in the three months to June 2023.

Over 1.51 million Australians ‘At Risk’ should rates increase further.

According to Roy Morgan, an interest rate rise of 25 basis points in August, taking the interest rate from 4.1% in June to 4.35%, will bring 30% of mortgage holders, or 1,515,000 Australians, into the ‘At Risk’ category.

An additional 25 basis point rise in the interest rate in September to 4.6% will make 30.7% of mortgage holders, or 1,551,000 Australians, ‘At Risk’ of mortgage stress.

Mortgage risk at different levels of interest rate increase in August & September 2023

Mortgage risk at different level of interest rate increase in August & September 2023
Source: Roy Morgan.

What is ‘At Risk’ or ‘Extremely At Risk’?

Mortgage owners are ‘At Risk’ if their mortgage repayments are higher than a set percentage of household income — from 25% to 45%, depending on income and spending.

On the other hand, mortgage holders are ‘Extremely at Risk’ if even ‘interest only’ mortgages go over a set proportion of their household income.

It is important to note that Roy Morgan’s data is based on conservative modelling, assuming that all other factors will remain the same. The biggest driver behind mortgage stress is unemployment, which has been rising alarmingly since January 2023.

Roy Morgan CEO, Michele Levine, says, “The latest figures show 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% of mortgage holders considered ‘At Risk’ in May 2008 during the Global Financial Crisis.”

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