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.


  • by Bank of Common Sense 29/08/2016 9:30:29 AM

    No surprise. Too many brokers actively encouraging borrowers to borrow more than they should. You plan on having a baby soon and going down to one income? No problem. We can still lend 80%, fix some, put the rest on variable interest only and the bank will tick it off. We just won't disclose you are planning on another baby and that "gift" from your parents has to be repaid. No problems. Sign here. It's a disturbing trend that must stop. Hopefully when some of these borrowers hit financial hardship, the banks and authorities will take action. Let the honest brokers do their job, those that are just seeking on maximising upfront and trail throw the book at them rather than glorifying them based on settlement figures. Shake up the industry now so those doing the right thing are rewarded.

  • by A little is knowledge is dangerous 29/08/2016 9:59:08 AM

    Yet reports in the papers today states 'This month's cut in official interest rates is set to put many homeowners further ahead on their mortgages, with new figures showing borrowers are using low rates to knock thousands of dollars off their home loans' with 2 of the big four quoted as saying 'including mortgage offset accounts, CBA customers were ahead by an average of 31 months on their loan repayments' and 'NAB said that on average, its customers were nearly 15 months ahead of their minimum repayments. (The Age 28/08)' This "research" has discovered that 'unemployment is the “biggest wild card” for mortgage stress' - unbelievable, I mean after over 200 years of banking in Australia do you think that never occurred to anyone before. Did these "researches" check to see if the borrowers have built a buffer in case of a change in employment? Did they all sell their homes and clear all their debts in case of their unemployment? No they built a buffer in their mortgage, built equity in their property and understood that income (employment) is required.

  • by Papery 29/08/2016 12:22:51 PM

    What was the arrears rate in Australia again......thats right 1.1% (prime mortgages) in Feb 2016.....please dont tell me that it's ok for you to want to take away the right to decide if people want to shell out the same excessive amount of rent to a greedy land lord instead of allowing them the option of managing their own financial affairs to perhaps own the asset (or at least some equity growth) in what continues to be ridicolusly overpriced housing & rental market for something that should be a right not a priviledge.

    Home ownership (owner occupier or investment) continues to be a primary goal across the generations & there are many ways to skin this particular financial cat to make it happen.

    Brokers facilitate the dream to reality & cant be held responsible for the shitty economy & employment situation. There are many potential property owners who cant get into the market because of stupid regulator & bank policies, & if the 'puter says no, go see a Broker who will be able to find a way to the approval.....thats why you are loosing market share Mr Bank of Common Sense.