One in ten mortgage holders at 'extreme' risk

by Julia Corderoy29 Aug 2016
Almost one in five mortgage holders are at mortgage risk, and more than one in 10 mortgage holders are classified to be at “extreme” mortgage risk, a comprehensive new survey has shown. 

Roy Morgan’s latest State of the Nation Report reveals that 18.4% of mortgage holders are “at risk” of mortgage stress and 13.9% at “extreme risk”. Roy Morgan Research CEO Michele Levine explains a mortgage holder is considered “at risk” if their loan repayments to pay off their mortgage are greater than a certain percentage – usually 15% to 30% – of household income. They are considered “extremely at risk” if the interest-only is over a certain proportion – usually 30% to 45% – of their household income.

The major determinant of mortgage risk levels, according to the report, is household income. For households with incomes under $60,000, 83.2% of them would be classified as in mortgage stress. In fact, risk levels don’t drop to below average (18% for the year) until household income reaches $80,000.

Given this finding, it comes as no surprise that the report showed that over two in three mortgages rely on more than one income. When incomes were combined, mortgage risk sank to 9% “at risk” and 8% “extremely at risk”.    

However, the reliance on more than one income is very problematic. The report shows that more than a third (38%) of double income mortgage holders would be “at risk” if one lost their job, whilst 30% would be placed “extremely at risk”. 

And in the context of the current labour market, where figures from the Australian Bureau of Statistics revealed that full-time employment had dropped over the past six months, this risk is heightened. 

According to Levine, unemployment is the “biggest wild card” for mortgage stress.