Expect mortgage stress rates to further ease: Roy Morgan

Patrick Buncsi

25 September 2024

August saw a modest decrease in the number of Australians reporting mortgage stress, with pollster Roy Morgan predicting a further fall over the coming months.

Nearly a third (29.5%) of mortgage holders, more than 1.66 million Australians, were rated at risk of mortgage stress, an August snapshot by Roy Morgan has revealed, a 0.3% decrease from July figures.

The record high of 35.6% of mortgage holders in mortgage stress was reached in mid-2008.

Roy Morgan said it expects a further fall in mortgage stress rates over the next few months – with the caveat that policy rates must either remain at their current rate of 4.35% or fall for the time in nearly four years.

The Reserve Bank of Australia (RBA) announced today it would keep interest rates on hold until at least early November, likely supporting the pollster’s prediction.

Regardless, this is still Australia’s highest interest rate in more than a decade.

Roy Morgan said the slight decline in mortgage stress was precipitated by a bump in household income, with many householders, including a significant proportion of mortgage holders, benefiting from the Government’s introduction of Stage 3 tax cuts.

Were the RBA to have raised interest rates at today’s and at its next meeting in November by a total of 50 basis points, Roy Morgan predicts that a record 1.71 million Australian mortgage holders would be in mortgage stress.

Nevertheless, the number of Australians ‘At Risk’ of mortgage stress remains considerable, increasing by 852,000 since May 2022 when the RBA began a cycle of interest rate increases.

As Roy Morgan notes, the number of mortgage holders considered ‘Extremely At Risk’, is now numbered at 1,013,000 (18.6% of mortgage holders) which is significantly above the long-term average over the last 10 years of 14.5%.

Mortgage holders are considered ‘At Risk’ if their mortgage repayments are greater than between 25% to 45% of their income.

Mortgage holders are considered ‘Extremely at Risk’ if even the ‘interest only’ is over a certain proportion of household income.