Mortgage stress hits highest level since July 2013 – Roy Morgan

It is expected to climb further as RBA continues with its interest rate increases

Mortgage stress hits highest level since July 2013 – Roy Morgan


By Mina Martin

An estimated 1.1 million mortgage holders, or 23.9%, were at risk in the December quarter – that’s up 358,000 on a year ago before the Reserve Bank began hiking interest rates, according to new research from Roy Morgan.

The three months to December encompassed the three interest rate hikes of 0.25%, which took the OCR to a record high of 3.1% in early December.

“For the first time in this cycle of interest rate increases, the proportion of mortgage holders considered ‘at risk’ has increased above the long-term average of 22.8% and is at its highest for nearly a decade - since May 2013,” said Michele Levine, Roy Morgan CEO.

Despite the sharp rise in the level of mortgage stress during the last year, the overall number remained well below the 35.6%, or 1,455,000 mortgage holders, recorded during the Global Financial Crisis in early 2009.

More concerning, however, was the increase in the number of mortgage holders considered “extremely at risk.” They were now estimated at 666,000, or 15%, in the December quarter. That is the highest since the 15.1% in July 2017 and was in line with the long-term average of 659,000, or 15.9%, over the last 15 years.

“When considering these figures on mortgage stress, it is always important to take into account that interest rates are only one of the variables that determines whether a mortgage holder is considered ‘at risk’,” Levine said. “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.

“The latest figures on mortgage stress show that as long as employment levels remain strong, the number of mortgage holders considered ‘at risk’ will not increase to anywhere near the levels experienced during the Global Financial Crisis in 2007-08-09 when a peak of 35.6% of mortgage holders were considered ‘at risk’ in May 2008.

According to the latest Roy Morgan employment estimates, a near-record 13.6 million Australians were employed in December – that’s up by over 650,000 since February 2020 when there were 12.9 million employed pre-pandemic.

“The strong growth in the jobs market has attracted more Australians into the labour force and there are now over 1.38 million unemployed Australians (9.3% of the workforce) compared to 1.17 million pre-pandemic,” Levine said.

The Roy Morgan CEO said mortgage stress will continue to lift as RBA continues with its interest rate hikes.

“The latest ABS CPI figures for the year to December 2022 show Australian inflation hitting a 33-year high of 7.8% – the highest March 1990 (7.8%). The rising inflation level in Australia, and all the indications from the RBA, suggest interest rates will increase again when the RBA meets again in February by +0.25% and again in March by another +0.25% to 3.60%,” Levine said.

“If the RBA does raise interest rates again in the next two months by a total of 0.5%, Roy Morgan forecasts that mortgage stress is set to increase to over 1.2 million mortgage holders considered ‘at risk’ by March 2023 – 26.3% of all mortgage holders.”

Have a thought about the increasing number of “at risk” and “extremely at risk” mortgage holders? Include it in the comments below. 

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