Mortgage anxiety at its highest since GFC

Yasmine Raso

Senior Journalist, Financial Newswire

6 June 2023

New research from comparison site, Finder, and research firm, Roy Morgan, has found a record number of Australians are struggling with mortgage stress, ahead of the Reserve Bank of Australia’s (RBA’s) next monetary policy decision later today.

Roy Morgan’s research found 1.38 million mortgage holders or 27.8 per cent were now deemed ‘At Risk’ of mortgage stress in the three months to April, which is the highest on record since August 2008’s 1.4 million.

This comes as the number of Australian mortgage holders ‘At Risk’ of stress grew by over 500,000 in the last 12 months, as the RBA increased the official cash rate 11 times in the past 12 monthly meetings to 3.85 per cent.

“The latest Roy Morgan data shows mortgage stress in the Australian housing market has continued to increase with 1.38 million mortgage holders (27.8%) defined as ‘At Risk’ in April 2023, up 529,000 (+10.2% points) on a year ago before the RBA began a record-breaking series of interest rate rises,” Michele Levine, CEO of Roy Morgan, said.

“The figures for April 2023 take into account the ten straight RBA interest rate increases which lifted official interest rates from 0.1% in May last year to 3.6% by April. Although the RBA did leave interest rates unchanged at their meeting in April, they subsequently increased interest rates again in the first week of May to 3.85% – just before the Albanese Government’s first Federal Budget.

“Despite the lowering of Inflation Expectations over the last month, the spike in the ABS monthly CPI figure – which was released earlier this week – has led many to believe the RBA will continue its cycle of interest rate increases next week by lifting interest rates by +0.25% to 4.1%.”

Finder’s Consumer Sentiment Tracker found 40 per cent of Australian mortgage holders polled said they struggled to pay their home loan in May, the highest result since the poll began in 2019. The tracker also showed a 24 per cent increase of those struggling to pay since May 2022, which is equivalent to 792,000 households.

The comparison site’s data also showed women (47 per cent) were struggling to afford their home loan repayments more than men (32 per cent) in May; just under 50 per cent of millennial homeowners said they struggled in the past month, compared to 33 per cent of Generation X.

“With 11 interest rate rises over the past 12 months, and potentially another one or two on the horizon – millions of mortgagees are at the end of their tether,” Graham Cooke, Head of Consumer Research at Finder, said.

“Many are facing the frightening prospect of defaulting on their loans and potentially losing their homes.

“If you haven’t already, try to negotiate a lower rate with your lender. If you don’t get it, it might be time to refinance somewhere else.”

Roy Morgan’s data revealed a further 30,000 mortgage holders would be considered ‘At Risk’ in June if the RBA increases interest rates by 25 basis points to 4.10 per cent, taking the total up to 1.4 million stressed households. If the interest rates were to increase by a further 25 basis points to 4.35 per cent in July, 30.2 per cent or 1.45 million mortgage holders would be designated ‘At Risk’ of mortgage stress.