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Mortgage stress: 1.5 million Aussies ‘at risk’

The number of Aussies facing mortgage stress is at a record high.

Composite image of Australian money and Australian houses. Mortgage concept.
Mortgage stress is now at its highest level since the global financial crisis. (Source: Getty/AAP)

A record number of Aussies are at risk of mortgage stress, following a year of aggressive interest rate hikes to rein in inflation.

An estimated 1.5 million mortgage holders - or 29.2 per cent - were considered ‘at risk’ of mortgage stress in the three months to July 2023, Roy Morgan research found.

This surpasses the previous record high numbers reached in May 2008 during the global financial crisis, with the number of Aussies considered ‘at risk’ up 642,000 from last year.

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The number of mortgage holders now considered ‘extremely at risk’ has increased to more than 1 million - or 20.3 per cent - which is significantly above the long-term average of the past 15 years of 15.4 per cent.

The survey, which is based on interviews with more than 10,000 owner-occupier mortgage holders, takes into account all 12 of the Reserve Bank of Australia’s interest rate hikes.

The central bank lifted rates from a record low of 0.10 per cent in May last year to 4.1 per cent by June 2023. It has since opted to keep interest rates on hold at its two most recent meetings.

Mortgage stress could get worse

The latest figures show inflation dropping to 6 per cent, down from 7 per cent in the year to March 2023, and a cycle high of 7.8 per cent in December 2022.

Roy Morgan CEO Michele Levine said the drop in inflation was welcome, but there were now new inflationary pressures in the economy.

“During mid-August the average retail petrol price in Australia increased to over $2 per litre for the first time since July 2022 – over a year ago,” Levine said.

“On two occasions during 2022, average retail petrol prices increased to over $2 per litre – in March 2022 and July 2022.

“On both occasions, after petrol prices soared, inflation expectations also increased rapidly – up from 4.7 per cent to 6.4 per cent in March 2022 and up from 5.1 per cent to 6.0 per cent in July 2022.”

Levine said the increases to petrol prices were being driven by a decline in the Aussie dollar, which is now below 65 US cents.

“Therefore, although many have suggested the RBA has finished its cycle of interest rate increases, 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,” Levine said.

If the RBA does raise interest rates again next week by 0.25 per cent, Roy Morgan forecasts mortgage stress to increase to more than 1.57 million mortgage holders.

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