More than 1.6 million households facing mortgage stress

Leading researcher Roy Morgan’s latest data shows 29.5 per cent of mortgage holders were at risk of payment stress in the three months to August 2024.

The big number, however, nonetheless represents a slight 0.3 per cent decrease on the July figures after the government rolled out its stage three tax cuts.

And the researcher said the decrease would continue in the next few months if the Reserve Bank of Australia (RBA) elected not to raise interest rates.

The record high of 35.6 per cent of mortgage holders in mortgage stress was reached in mid-2008.

The number of Australians “at risk” of mortgage stress has increased by 852,000 since May 2022 when the RBA began a cycle of interest rate increases.

Official interest rates are now at 4.35 per cent, the highest interest rates have been since December 2011, over a decade ago.

The number of mortgage holders considered “extremely at risk” is now numbered at just over a million (18.6 per cent of the total) which is still significantly above the long-term average over the last 10 years of 14.5 per cent.

And while the number is decreasing, Roy Morgan is warning of the potential impact of rate rises in the coming months.

“The latest ABS figures on inflation show that inflation is still well above the Reserve Bank’s preferred target range of two to three per cent,” CEO Michele Levine said.

“In addition, key inflation indicators such as petrol prices remain high – for the first time in history average retail petrol prices have been above $1.70 per litre for nearly two years – a record total of 103 straight weeks since late September 2022.

“For these reasons we have modelled interest rate increases of 0.25 per cent later this week to 4.6 per cent and an additional interest rate increase of 0.25 per cent to 4.85 per cent in early November.”

Mortgages “at risk” of stress will increase to new record highs in September, October and November in those circumstances.

Another 2000 households would join the “at risk” group in September, with a further 19,000 doing so in October on the back of the hypothetical September increase, representing 29.9 per cent of mortgage holders.

A November increase would see 32,000 more “at risk” households, a new record high of 1.712 million, or 30.5 per cent, Roy Morgan said.

“However, the latest figures show that when considering mortgage stress, it is important to appreciate that interest rates are only one of the variables that determines whether a mortgage holder is considered ‘at risk’ – the variable with the largest impact on whether a borrower falls into the ‘at risk’ category is related to household income – which is directly related to employment,” Levine said.

“The employment market has been strong over the last year (the latest Roy Morgan estimates show 375,000 new jobs created compared to a year ago) and this has provided support to household incomes which have helped to moderate levels of mortgage stress over the last year.”