Mortgage stress up despite no rate rise: Roy Morgan

The latest research released by Roy Morgan has found that 1,629,000 mortgage holders (31.4 per cent) were at risk of mortgage stress in the three months to February 2024.

This represented an increase of 0.4 per cent (20,000 mortgage holders) on the “record high” number recorded in January of 1,609,000. Notably, this period did not have the Reserve Bank of Australia’s (RBA) increased interest rates, leaving rates unchanged at 4.35 per cent.

According to Roy Morgan, there are 822,000 more mortgage holders at risk of stress after 18 months of interest rate rises.

However, the proportion of mortgage holders at risk of stress still remains below the GFC high of 35.6 per cent.

Mortgage holders falling into the “extremely at risk” of mortgage stress cohort now total 987,000 or 19.7 per cent of mortgage holders, sitting well above the long-term average over the last 10 years of 14.3 per cent.

According to Roy Morgan, unemployment has been the primary factor having the largest impact on income and mortgage stress.

Roy Morgan chief executive Michele Levine said: “The variable that has the largest impact on whether a borrower falls into the ‘at risk’ category is related to household income – directly related to employment.

“The employment market has been exceptionally strong over the last year, and this has underpinned rising household incomes that have helped to moderate the increases in mortgage stress since mid-2023.”

Indeed, the latest Labour Force data released by the Australian Bureau of Statistics (ABS) revealed a decline in the unemployment rate to 3.7 per cent in February in seasonally adjusted terms.

This followed a 0.2 percentage point increase in January, which saw the unemployment rate rise from 3.9 per cent to 4.1 per cent.

According to the ABS, the substantial increase in employment for the month followed “larger-than-usual numbers” of people during December and January who had a job that they were either waiting to begin or return to.

As a result, a larger-than-usual flow of people entered employment in February, even more so than February last year.

Borrowers are not falling behind on repayments, RBA says

Although the number of people at risk of mortgage stress continues to climb month on month, the RBA recently noted in the latest Financial Stability Review – March 2024 that while elevated inflation and interest rates have put household budgets under pressure, “nearly all” borrowers are still servicing their debts on time.

According to the RBA, while housing and personal loan arrears have increased since late 2022, those arrears still remain below pre-pandemic levels. Despite this, the RBA admitted it has noticed a rising share of borrowers requesting temporary hardship arrangements from lenders.

In turn, this has contributed to arrear rates remaining “a little lower” than would have otherwise been the case.

Australia’s banks expect arrears to continue to rise but still remain at historical lows.

[RELATED: Borrowers continue to service debts on time: RBA]