More Aussie mortgage holders at risk than ever before

The number of Australians deemed to be ‘at risk’ of mortgage stress was found to have hit a record high of 1.5 million, or 29.2 per cent of mortgage holders. Approximately a third of Australians are paying off a mortgage, while the remainder either rent or own their homes outright.

This is 642,000 more households at risk of mortgage stress after a year of interest rate increases, and surpasses the 1.46 million Aussies deemed to be at risk in the three months to May 2008, in the midst of the global financial crisis.

However, though the number of Australians ‘at risk’ is higher than at that financially precarious moment 15 years ago, due to population increase, the proportion of Australians at risk of mortgage stress is actually lower than during the GFC, when 35.6 per cent of Aussies were experiencing mortgage stress.

Roy Morgan’s CEO, Michele Levine, noted that the number of people deemed to be ‘extremely at risk’ of mortgage stress had also tracked similarly with the increases seen during the GFC.

“Of even more concern is the rise in mortgage holders considered ‘extremely at risk’, now estimated at 1,017,000, or 20.3 per cent, in July 2023 – the highest for over 15 years since July 2008’s 26.2 per cent. This is an increase of over 470,000 mortgage holders from a year ago, or 7.6 per cent,” Ms Levine remarked.

While some economists have opined that the Reserve Bank of Australia (RBA) might be at the end of its tightening cycle, Ms Levine said that there are factors which might encourage the RBA to embark on further rate increases.

“Although the drop in the quarterly Consumer Price Index figure is welcome, there are new inflationary pressures building in the economy,” she said, noting that CPI figures for the year to June 2023 show Australian inflation dropping to 6 per cent, down from a cycle high of 7.8 per cent in the year to December 2022.

“The low Australian dollar and high petrol and energy prices adding to inflation may force their hand for further interest rate increases in the months ahead,” Ms Levine commented.

These possibilities are the motivating factor behind the firm’s decision to produce modelling for two further interest rate rises, showing that if the RBA does raise interest rates again next week by 0.25 per cent, Roy Morgan forecasts mortgage stress is set to increase, with over 1.57 million mortgage holders, or 30.2 per cent, considered ‘at risk’ by September 2023.