Almost 1.6 million Aussies might be at risk of mortgage stress

More than 1,573,000 mortgage holders have been identified as ‘at risk’ of mortgage stress in three months to September, 2023, according to the research by Roy Morgan.

This period included three Reserve Bank of Australia (RBA) meetings at which interest rates were left unchanged and indicated a new record high, with higher figures of up to 7,000 compared to a month ago.

This also translated to over 760,000  households at risk of mortgage stress after a year of interest rate increases, with official interest rates sitting at 4.1% in October, 2023, which was the highest official interest rates since May, 2012, over a decade ago.

Following this, the number of mortgage holders considered ‘extremely at risk’, is now numbered at 1,043,000 (20.5%) which is now significantly above the long-term average over the last 15 years of 15.3%.

Further to that, mortgages ‘At Risk’ are set to increase to over 1.58 million if RBA raises rates by +0.25% in November.

Roy Morgan has modelled the impact of two potential RBA interest rate increases of +0.25% in both November (+0.25% to 4.35%) and December (+0.25% to 4.6%).

If the RBA raises interest rates by +0.25% in November to 4.35%, there will be 30.4% (up 0.1% points) of mortgage holders, 1,581,000, considered ‘At Risk’ in November 2023 – an increase of 8,000.

If the RBA raises interest rates by a further +0.25% in December to 4.6%, there will be 31.0% (up 0.7% points) of mortgage holders, 1,612,000, considered ‘At Risk’ in December 2023 – an increase of 39,000, the research said.

“If the RBA does raise interest rates next week by 0.25%, Roy Morgan forecasts mortgage stress is set to increase to over 1.58 million mortgage holders (30.4%) considered ‘At Risk’,” Michele Levine, chief executive of Roy Morgan, said.

“Of even more concern is the rise in mortgage holders considered ‘Extremely At Risk’, now estimated at 1,043,000 in September 2023. This figure has more than doubled since the RBA began raising interest rates, representing an increase of over 560,000 mortgage holders.

“When considering the data on mortgage stress, it is always important to appreciate interest rates are only one of the variables that determines whether a mortgage holder is considered ‘At Risk’. The variable that has the largest impact on whether a borrower falls into the ‘At Risk’ category is related to household income – which is directly related to employment.”