Powered by MOMENTUM MEDIA
subscribe to our newsletter

Mortgages reliant on dual-incomes present 'potential risk'

Relying on two incomes to repay home loans presents “a potential risk [of] ‘mortgage stress’”, new research has suggested.

The State of the Nation - Spotlight on Finance Risk report from Roy Morgan Research has revealed that more than two-thirds of owner-occupied mortgages are now held by households with two incomes, “presenting some problems if one decides to either drop out of the workforce or becomes unemployed”.

The researchers highlighted that although the 3.2 million mortgage holders who are in dual-income households have lower-than-average mortgage risk levels (only 9.3 per cent are ‘at risk’ of failing to meet the repayment guidelines provided by their banks, compared to the overall market average risk of 17.4 per cent), the levels would rise significantly if even the non-main earner drops out of the workforce.

According to Roy Morgan Research, if the non-main earner dropped out of the workforce, some 34.8 per cent would be at risk of mortgage stress.

Further, if one income in these households is lost due to having a family, unemployment, retirement, or any other reason, the ‘extremely at risk’ level would rise from 6.5 per cent, to 27. 1 per cent.

Advertisement
Advertisement

Both of these are approximately double the level of the average mortgage holder.

Norman Morris, industry communications director for Roy Morgan Research, commented, “Although mortgage stress levels have tended to decline over the last five years in line with the drop in interest rates, they remain of some concern with 17.4 per cent of mortgage holders ‘at risk’, and 13.1 ‘extremely at risk’.

“Mortgage stress levels are likely to remain high even with further interest rate reductions, as this appears to encourage higher house prices and borrowings.

“The heavy reliance on two-income households for home loan repayments reduces mortgage risk, providing both parties remain employed.”

Mr Morris concluded that the biggest impact on mortgage stress is likely to be unemployment or a move to increase levels of underemployment.

PROMOTED CONTENT


“[T]he loss of an income in a two-income household has more impact than a doubling of interest rates,” he warned.

The news from Roy Morgan Research is timely, as new data from comparison website RateCity shows that, of Australia’s capital cities, only two have a median house price that is affordable on a single income.

Hobart and Adelaide remain the last affordable cities for the nation’s singles, while the average household income required to buy a median-priced house in Sydney is $137,556 (if mortgage holders spent no more than 30 per cent of their income on loan repayments).

This figure was followed by Melbourne ($96,706) and Brisbane ($80,866) as the average household incomes required to meet mortgage repayments while living comfortably.

“Our analysis reveals a reality that many young Australians are now living; the impossibility of affording a median-priced house on an average salary in most cities,” said Peter Arnold, data insights director at RateCity.

[Related: Housing price growth will “moderate”]

Mortgages reliant on dual-incomes present 'potential risk'
mortgagebusiness

Are you a new-to-industry broker in the process of growing your business? Then there’s some great news: The Adviser’s New Broker Academy is back in 2021 and will provide you with essential insights into cutting-edge tools, strategies and processes to fast-track to success. Don’t miss your chance to attend. To secure your FREE place, visit newbroker.com.au now!

Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts. 

Contact Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.

Latest News

Reverse mortgage lenders have accessed a small fraction of the potential retiree housing market in Australia, according to Deloitte. ...

Pepper Money has priced its second I-Prime deal for the year, upsizing the figure to $850 million. ...

The LMI provider has announced a new CFO following the resignation of its current CFO, effective 24 September. ...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

How long do you think it should take to discharge a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.