Millions of Aussies in mortgage stress

Mortgage owners are experiencing their highest levels of stress in almost a decade.

·2-min read
Young people walking through city in Australia. Australian money notes. Mortgage stress concept.
Millions of Aussies are at risk of mortgage stress following multiple interest rate rises. (Source: Getty)

An estimated 1.1 million Aussies are at risk of mortgage stress, with borrowers likely to face another interest rate rise next week.

New research from Roy Morgan found 23.9 per cent of mortgage holders were considered “at risk” of mortgage stress in the three months to December 2022, the highest levels in nearly a decade.

“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 per cent and is at its highest for nearly a decade since May 2013,” Roy Morgan CEO Michele Levine said.

“Of more concern is the rise in mortgage holders considered ‘Extremely At Risk’, now estimated at 666,000 (15.0 per cent) in December 2022 – the highest since July 2017 (15.1 per cent) more than five years ago.”

These figures take into account all eight of the Reserve Bank’s (RBA) interest rate increases so far, which have lifted rates from 0.1 per cent to 3.1 per cent.

More interest rate pain to come

Borrowers are likely to face another interest rate hike when the RBA board meets next Tuesday - its first meeting of the year. It follows the December quarter inflation figures, which saw the annual rate hit 7.8 per cent.

“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 per cent and again in March by another +0.25 per cent to 3.60 per cent,” Levine said.

If that happens, Roy Morgan said more than 1.2 million mortgage holders - or 26.3 per cent of borrowers - would be considered ‘At Risk’ by March.

Roy Morgan said this was a “conservative model” and assumed all other factors, including unemployment, would remain the same.

“The greatest impact on an individual’s, or household’s, ability to pay their mortgage is not interest rates, it’s if they lose their job or main source of income,” it said.

The findings are based on interviews with more than 60,000 Aussies each year, including more than 10,000 owner-occupier mortgage-holders.

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