A record 1.5 million people – almost one third of all mortgage holders – are now considered at risk of mortgage stress across Australia as interest rate hikes continue to bite.
The figure surpasses the previous highest number of people experiencing mortgage stress: 1.46 million in the three months to May 2008 at the height of the global financial crisis.
Mortgage holders are considered at “at risk” when they spend between 25 and 45% of their household income on their home loan.
The new research from Roy Morgan also showed mortgage risk will increase further if the Reserve Bank raises interest rates again in September.
After a year of rate rises by the RBA, there are 640,000 more households at risk of mortgage stress compared with the same period in 2022.
The number of mortgage holders now considered “extremely at risk” of mortgage stress has also increased to just over one million. That represents more than 20% of mortgage holders, significantly above the long-term average over the last 15 years of 15.4%, and the highest for more than 15 years since July 2008.
To be considered extremely at risk, mortgage holders have to pay a certain portion of their income on interest repayments alone.
Roy Morgan predicted that if the RBA increased interest rates by 0.25% in September 2023, 81,000 more mortgage holders would be considered at risk.
An increase in October would put another 108,000 mortgage holders at risk, up to a potential total of over 1.6 million.
It comes after the RBA increased interest rates in 12 of its last 15 monthly meetings, and as interest rates sit at 4.1%, the highest since May 2012.
The Roy Morgan CEO, Michele Levine, said the increases in mortgage stress were “substantial” and that any increases in unemployment, the largest factor in a household’s ability to pay the mortgage, would make things worse.
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“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,” she 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.”
Levine added that while many are assuming the RBA is at the end of its cycle of interest rate rises, an increase in petrol prices and a drop in the value of the Australian dollar could increase inflationary pressures.
“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.”
