But mortgage holders face renewed pressure from potential rate increases
Around 1.66 million Australian mortgage holders, or 29.5%, were considered at risk of mortgage stress in the three months to August 2024, new research from Roy Morgan has shown.
The latest figure marks a slight decrease of 0.3% compared to July, following the introduction of Stage 3 tax cuts, which boosted household incomes for millions of Australians, including many mortgage holders.
While mortgage stress levels are projected to decrease in the coming months, this outlook could change if the Reserve Bank of Australia (RBA) decides to raise interest rates later this week, Roy Morgan pointed out.
Currently, more than one million mortgage holders, or 18.6%, are classified as extremely at risk of mortgage stress, significantly higher than the 10-year average of 14.5%.
Roy Morgan classifies mortgage holders as at risk if their mortgage repayments exceed a certain percentage of household income, depending on income and spending. Those considered extremely at risk are individuals whose interest only payments surpass a set proportion of their income.
Mortgage stress reached its peak in mid-2008, when 35.6% of mortgage holders were considered at risk. Since May 2022, when the RBA began raising interest rates, the number of Australians at risk of mortgage stress has increased by 852,000. The official interest rate currently stands at 4.35%, the highest since December 2011, but a cash rate decision will be announced later this afternoon.
Roy Morgan has modelled the potential impact of further RBA interest rate hikes. A 0.25% increase to 4.6% in September could push the number of mortgage holders at risk to 1.66 million, or 29.6%. By October, this figure could rise to 1.68 million (29.9%). If another 0.25% rate hike occurs in November, the number of Australians at risk could reach 1.71 million, or 30.5%, a record high. 
While interest rates play a significant role in mortgage stress, employment remains the most critical factor. The latest Roy Morgan data shows that nearly one in five Australian workers, or 18.6%, were unemployed or under-employed in August. Although real unemployment dropped to 9.1%, the high under-employment rate continues to affect household incomes.
Michele Levine (pictured above), chief executive of Roy Morgan, noted that income tax cuts have provided some relief, but warned that further interest rate increases could offset these benefits.
“Two additional rate increases of 0.25% would bring the total number of mortgage holders at risk to over 1.7 million,” she said.
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