Levels of mortgage stress continue to climb: Roy Morgan

The latest research released by Roy Morgan has revealed that 31 per cent of mortgage holders were “at risk” of mortgage stress in the three months to January 2024.

This equated to 1,609,000 mortgage holders now entering the “at risk” category, an increase from the 1,527,000 (30.3 per cent) recorded in December 2023.

The research has shown that the number of Australians that have entered this cohort increased by 802,000 since the beginning of the Reserve Bank of Australia’s (RBA) rate hiking cycle in May 2022.

According to Roy Morgan, the January figures have surpassed the previous record highs of 1.56 million in August and September 2023.

However, the number of mortgagors at risk of stress still remains below the record high reached during the Global Financial Crisis (35.6 per cent), due to the larger size of Australian mortgage market in the present day.

There was one interest rate hike during this period (Melbourne Cup Day) which brought the cash rate from 4.1 per cent to 4.35 per cent, where it currently stands.

Mortgage holders considered “extremely at risk” numbered 994,000 (19.8 per cent) as of January 2024, sitting above the long-term decade average of 14.3 per cent.

Roy Morgan chief executive Michele Levine commented: “The extended pause in official interest rate increases for four months from July–October 2023 reduced the pressure on mortgage holders and allowed growth in several areas of the economy to ‘catch up’ and reduce mortgage stress from the mid-year highs above 1.56 million.

“However, the interest rate increase in November has added renewed pressure on mortgage holders.”

Levine warned, should there be a reacceleration in inflation over the months ahead resulting in further interest rate increases in 2024, levels of mortgage stress will continue to rise to record highs.

Roy Morgan’s latest findings came as data from credit bureau illion has found that more consumers entered hardship agreements in 2023.

In particular, 0.4 per cent of all home loan accounts (approximately 23,000 accounts) are in some type of hardship agreement.

illion found that the number of home loans with payments behind increased 25 per cent year-on-year, and while the increases observed in 2023 seem to be tapering off, home loan 30-plus day arrears will “stabilise at a higher base in 2024”.

illion’s head of analytics, Louis Tsang, flagged: “Even though inflation has slowed if credit repayments remain high throughout the year, we will see more consumers seeking support from their lenders in 2024.”

Additionally, S&P Global Ratings’ (S&P) RMBS Performance Watch: Australia quarterly report (ended 31 December 2023) found that RMBS prime mortgage arrears increased to 0.97 per cent during the quarter from a historical low of 0.58 per cent (recorded during the COVID-19 pandemic).

S&P noted a delay in the rise in arrears due to savings buffers built up during the pandemic which has protected mortgage holders from the last 18 months of monetary policy tightening.

[RELATED: RMBS prime arrears continue to rise: S&P]