Mortgage costs increase by almost 80%

Mortgage interest makes up a larger share of expenses for employee households due to rate increases, the latest data from the Australian Bureau of Statistics (ABS) for the first quarter of 2023 ended 31 March has revealed.

The data showed that Australia’s ‘living cost index’, that is the measure of goods and services on households, rose between 7.1 per cent and 9.6 per cent across all indexes.

In particular, the data revealed that mortgage interest charges have had a significant impact on employee households, with a sharp increase of 78.9 per cent over the past year.

Indeed, the rise comes as the Reserve Bank of Australia (RBA) has lifted the cash rate by 375 bps over the past year, taking the official cash rate to 3.85 per cent, and the March quarterly inflation figures remained high at 7 per cent.

Employee households were particularly affected, as mortgage interest charges make up a larger proportion of their expenses compared to other types of households.

In addition, the other four household types experienced increases between 7.1 per cent and 7.4 per cent in the same period, slightly above the overall consumer price index (CPI) increase of 7.0 per cent.

The rising cost of housing and food as well as non-alcoholic beverages were the primary factors driving the increase in these household types’ expenses.

Financial hardship hits 6-year high: NAB

Just as Australians are spending more money on mortgage repayments, the latest NAB Consumer Insights report for the first quarter of 2023, revealed that one in four Australians believe they are struggling “very much” to make ends meet, up from 22 per cent in 4Q22.

Not having enough for an emergency was the biggest cause of financial hardship followed by not having enough for food and basic necessities, and being unable to pay a bill.

Almost one in four people who experienced hardship missed a bill payment, while one in 20 missed a mortgage repayment.

In addition, 6 per cent of people reported hardship due to mortgage payments, up from 5 per cent in 4Q22 and 3 per cent one year ago.

However, almost one in 10 Australians under 50 experiencing hardship said they were unable to pay their mortgage in Q1.

The number of people unable to meet minimum credit card repayments or not having enough to pay off personal loans both rose from 6 per cent to 8 per cent in Q1.

Meanwhile, the share of women struggling also climbed to 28 per cent up from 25 per cent in 4Q22.

Hardship felt across income brackets

The report showed while all age groups were being impacted by increasing financial pressures, those aged 30–49 and 18–29 were particularly feeling the impacts, with one in three people earning less than $50,000 experiencing financial hardship in the first quarter of this year.

While the percentage remained unchanged for the lower income group, it rose from 27 per cent to 33 per cent among those earning between $35,000 and $50,000.

The statistics also revealed that financial struggles were not limited to the lower income bracket, as approximately one in four individuals in income groups between $50,000–$100,000 also faced financial difficulties.

Indeed, the $50,000–$75,000 income group had the highest number of people missing payments in almost all categories, including loans from family or friends, BNPL, rent, home loans or mortgages, and payday loans.

[Related: Greens call on the government to freeze rates]