The number of Australians considered at risk of mortgage stress has reached a record high, surpassing levels not seen since 2008, when the global financial crisis hit.
About 1.5 million mortgage holders (29 per cent) are at risk of mortgage stress, when a household spends 25 to 45 per cent of its after-tax income towards monthly repayments, according to a new report.
The research from Roy Morgan, released on Monday, paints a grim reality of Australia’s borrowing market, with the number of Australians at risk up 642,000 on last year.
Looking for a new job or job candidate? Post jobs and search for local talent on 7NEWS Jobs >>
The number of households considered “extremely at risk” also rose to 1,017,000, which Roy Morgan says is “significantly” above the long-term average over the last 15 years.
Borrowers have battled rising cost of living expenses and a year of rate rises, as the Reserve Bank of Australia hiked rates at 12 of 15 monthly meetings.
The new figures for July top the previous record high of 1.46 million reached in the three months to May 2008 during the global financial crisis.
While the number of Australians at risk of mortgage stress is at a record high, the proportion remains below that in mid-2008 due to the larger size of today’s mortgage market, according to Roy Morgan.
Anxious wait ahead of rates call
Hurting households will be anxiously watching the RBA’s rate decision next week, with the cash rate currently at 4.1 per cent — the highest it has been since May 2012.
If the RBA bumps rates by 0.25 per cent next week, Roy Morgan estimates 81,000 more borrowers will be considered at risk of mortgage stress.
A further 0.25 per cent increase in October would bring this to 1,604,000 — an increase of 108,000.
Roy Morgan CEO Michele Levine said the increase in mortgage holders at risk was “substantial” and any increases in unemployment, the main factor in a household’s ability to meet repayments, would exacerbate this.
“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,” Levine said.
“If the RBA does raise interest rates again next week by 0.25 per cent, Roy Morgan forecasts mortgage stress is set to increase to over 1.57 million mortgage holders (30.2 per cent) considered ‘at risk’ by September 2023.”
Levine said of even more concern was the rise in mortgage holders considered “extremely at risk”.
“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,” she said.
