But further RBA rate increases could reverse gains
Around 1.6 million Australian mortgage holders, or 29.8%, were classified as “at risk” of mortgage stress in the three months leading up to July 2024, Roy Morgan’s latest research has revealed.
The new figure marks a slight decrease of 0.5 percentage points from June, attributed to the introduction of Stage 3 tax cuts in July, which boosted household income for millions, including many mortgage holders.
Roy Morgan said the number of mortgage holders “at risk” of mortgage stress is expected to decline further in the coming months. However, this trend may reverse if the Reserve Bank of Australia (RBA) opts to raise interest rates at its September meeting. The proportion of mortgage holders at risk peaked at 35.6% during mid-2008.
Since the RBA began its cycle of interest rate hikes in May 2022, the number of Australians at risk of mortgage stress has risen by 797,000. Currently, official interest rates stand at 4.35%, the highest since December 2011.
The number of mortgage holders deemed “extremely at risk” has surged to 982,000, representing 18.9% of all mortgage holders, well above the long-term average of 14.5% over the past decade.
Roy Morgan’s forecasts suggest that if the RBA increases interest rates by 0.25% to 4.6% in September, the number of mortgage holders “at risk” will still decrease slightly to 1.59 million (29.5%) in August, due to the ongoing impact of the Stage 3 tax cuts. However, by October, the number could rise to 1.62 million (30.1%) if the rate hike occurs.
The report highlights that mortgage stress is influenced by various factors, with household income, closely tied to employment, being a crucial determinant. While interest rates play a role, the recent tax cuts have provided significant financial relief, helping to mitigate the impact of rising rates.
“The latest figures show that when considering mortgage stress, it is important to appreciate that interest rates are only one of the variables that determines whether a mortgage holder is considered ‘at risk’,” said Michele Levine (pictured above), chief executive of Roy Morgan. “The Stage 3 income tax cuts are delivering significant financial relief, and a boost to take home pay, for millions of Australian taxpayers – including many mortgage holders.
“As these figures show, the variable with the largest impact on whether a borrower falls into the ‘at risk’ category is related to household income – which is directly related to employment. The employment market has been strong over the last year (the latest Roy Morgan estimates show 375,000 new jobs created compared to a year ago) and this has provided support to household incomes which have helped to moderate levels of mortgage stress since the highs of early 2024.”
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