New data from Roy Morgan indicated that nearly 29% of Australian mortgage holders are currently at risk of mortgage stress, marking the highest level since August 2024.
Despite recent economic interventions, the risk has escalated, signalling a troubling trend that began in late 2020.
The implementation of the Stage 3 tax cuts initially led to a reduction in mortgage stress.
These cuts boosted household incomes, decreasing the proportion of “at risk” mortgage holders from June to October. However, the relief was short-lived.
By January, the percentage of “at risk” mortgage holders climbed to nearly 28.9%, a stark increase from previous months.
The concern over mortgage stress is not new. Historical data showed that the peak of mortgage stress was in mid-2008, when 35.6% of mortgage holders were struggling.
The situation today echoes these challenging times, with 826,000 more Australians now “at risk” compared to the period following the interest rate hikes that started in May 2022.
Currently, the number of Australians categorised as “extremely at risk” has surged to 1,043,000. This figure represents 18.9% of mortgage holders and is significantly higher than the ten-year average of 14.6%.
According to Roy Morgan, the Reserve Bank’s decision to maintain interest rates towards the end of last year may have contributed to the recent uptick in mortgage stress.
The RBA cut interest rates by +0.25% to 4.1% in mid-February, a move prompted by a year-long decline in inflation. Roy Morgan anticipates further reductions, projecting a drop to 3.85% in April. This adjustment is expected to decrease the number of mortgage holders considered “at risk” by another 33,000.
The Roy Morgan report, following findings that first-home buyers across Australia are facing significant mortgage stress, highlighted unemployment as a critical factor affecting mortgage stress, noting that over 3.4 million Australians are currently unemployed or underemployed.
Despite interest rate cuts, job security remains the most significant determinant of mortgage stress.
While RBA’s recent actions have provided some relief, further interest rate cuts are expected if inflation remains within the target range of 2-3%.
Michele Levine (pictured above), CEO of Roy Morgan, pointed out that while the job market’s strength over the past two years has supported household incomes, interest rates remain a crucial factor in alleviating mortgage stress.
