Yearly mortgage stress on the decline

While this downward trend is mainly due to lower interest rates, borrowers still remain “very sensitive” to future rate changes

Yearly mortgage stress on the decline



Fewer mortgage holders are under stress than they were a year ago, says new research which points at lower interest rates as the primary cause.

Australian research firm Roy Morgan found that in the three months prior to April 2017, 16.8% or 666,000 mortgage holders were considered ‘at risk’ regarding their home loan repayments. This was down from the 18.4% or 744,000 of mortgage holders recorded 12 months ago.

These results come from a recent survey of more than 50,000 respondents nationwide including over 10,000 owner occupied mortgage holders.

By measuring mortgage stress as the ability of borrowers to meet major banks’ stated repayment guidelines, the level of mortgage holders ‘at risk’ was well below the average of the last decade, Roy Morgan found.

The firm also measured those ‘extremely at risk’ based on the ability to meet required repayments on amounts currently outstanding. At 11.5% or 442,000 mortgage holders, this is currently the lowest level in more than a decade.

The study showed that mortgage stress was highest amongst lower income groups. For those with an annual household income of less than $60,000, 85.3% were ‘at risk’ while 65% were ‘extremely at risk’.

On the other hand, for households with an average annual income of over $100,000, approximately 1% were ‘at risk’ while less than 1% were ‘extremely at risk’.

“Although mortgage stress levels are trending down over the last year, they remain very sensitive to interest rates and household income levels. Over the last 12 months interest rates are down a little but have tended to remain steady over recent months,” said Norman Morris, industry communications director at Roy Morgan Research.

“With the stress levels being much lower in the higher income groups it appears that the decline in overall mortgage risk since the December quarter has been partly as a result of the increased proportion of borrowers in households with incomes over $100,000 per annum.”

Stress levels used in this analysis cover all existing borrowers including those who have had a loan for some time, Morris said. These individuals are likely to owe less than new borrowers and so face lower levels of stress, he added.

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