30% of mortgage holder face mortgage stress: Roy Morgan

According to recent research conducted by Roy Morgan, an estimated 1.43 million (28.7 per cent) mortgage holders in Australia were deemed ‘At Risk’ of ‘mortgage stress’ in the three months leading up to June 2023.

This period saw two consecutive interest rate increases, of 25 bps, bringing the official interest rates to 4.1 per cent in June.

Chief executive of Roy Morgan, Michele Levine, said this figure represents the highest number of mortgage holders facing potential mortgage stress, matching the data from the previous three months, and is the largest in over 15 years.

The last time the country experienced a similar situation was in May 2008 when 1.46 million mortgage holders were classified as ‘At Risk’.

It comes ahead of the Reserve Bank of Australia’s (RBA) next monetary policy meeting on 1 August, where the board will decide whether to keep the cash rate at 4.1 per cent.

“If the RBA does raise interest rates again next week by 0.25 per cent Roy Morgan forecasts mortgage stress is set to increase to over 1.51 million mortgage holders (30.0 per cent) considered ‘At Risk’ by August 2023,” Ms Levine said.

This would signify an alarming rise of 81,000 individuals facing mortgage stress.

Given the RBA remains adamant to bring back inflation to the target 2–3 per cent range, the latest Consumer Price Index (CPI) data from the Australian Bureau of Statistics (ABS) may provide some relief.

The June quarterly data showed inflation reached 6 per cent, down from a peak of 7.8 per cent in December 2022 and from 7 per cent in the previous March quarter, which economists said could be enough to hold interest rates.

Ms Levine said the CPI figures “will play a key role in the RBA’s determinations about whether to increase interest rates again next week”.

Regardless of the RBA’s decision next week, over the past year, the number of Australians ‘At Risk’ of mortgage stress has surged by 539,000 due to rapid interest rate increases that have stretched home owners’ finances.

Despite this substantial increase over the past year, the total number of Australians experiencing mortgage stress (1,434,000 or 28.7 per cent of all mortgage holders) remains below the levels reached during the global financial crisis in early 2008 when 1,455,000 mortgage holders (35.6 per cent) were under stress.

Coinciding with this data, S&P Global Ratings has reported an increase in mortgage arrears in Australia.

However, the rates have not surged uniformly across the country and have, for the most part, stayed close to long-term averages.

The arrears rate, although on the rise, remains significantly lower than the peaks observed during the global financial crisis, which reached 1.8 per cent.

However, further interest rate hikes could push the figures to levels comparable to those experienced during the previous financial crisis.

[Related: Mortgage arrears highest in out regions of capitals: S&P]