Mortgage stress rises in November

Higher unemployment puts pressure on Australian households

Mortgage stress rises in November

The proportion of Australian mortgage holders experiencing mortgage stress rose to 26.8% in November 2024, up from October, according to new data from Roy Morgan.

This marks the first monthly increase since the Stage 3 tax cuts were introduced in July 2024, which boosted household incomes.

The survey, conducted in the three months to November 2024, found that while the percentage of mortgage holders “at risk” of mortgage stress remains 3.5 percentage points lower than in June, it has increased by 707,000 since May 2022, when the Reserve Bank of Australia (RBA) began its aggressive interest rate hikes. The RBA’s cash rate currently sits at 4.35%, its highest level since December 2011.

Roy Morgan defines mortgage holders as “at risk” of mortgage stress if their mortgage repayments exceed a certain percentage of household income, and “extremely at risk” if even interest-only repayments surpass a critical threshold of income. By November, 16.9% of mortgage holders – equivalent to 931,000 Australians – fell into the “extremely at risk” category, well above the long-term average of 14.6% over the past decade.

Roy Morgan has modelled the potential impact of a 0.25% rate cut in February, which would bring the cash rate down to 4.1%. If implemented, this cut could reduce the proportion of mortgage holders “at risk” to 26.3%, equating to 1.488 million Australians – 26,000 fewer than in November. 

The November data follows the RBA’s decision to hold interest rates steady for the eighth consecutive meeting. The central bank has kept rates unchanged despite annual inflation falling to 2.3% in November, within its target range of 2-3% for the fourth straight month. However, core inflation, or the trimmed mean, remains above target at 3.2%, which could influence future rate decisions.

Roy Morgan chief executive Michele Levine (pictured above) noted that while interest rates are an important factor in determining mortgage stress, employment remains the most significant variable.

“The greatest impact on an individual or household’s ability to pay their mortgage is not interest rates; it’s whether they lose their job or main source of income,” Levine said.

Roy Morgan’s unemployment estimates revealed that 20.3% of Australian workers were either unemployed or underemployed in December – the highest level since August 2020. With unemployment rising to 9.7% and a drop of 150,000 in overall employment last month, household incomes are under increasing pressure.

The current level of mortgage stress remains well below the record high of 35.6% reached during the global financial crisis in mid-2008. However, the 13 rate hikes since May 2022, which collectively increased the cash rate by 4.25 percentage points, have pushed more households into financial difficulty.

Roy Morgan’s findings are based on its Single Source Survey, which includes annual interviews with over 60,000 Australians, including more than 10,000 owner-occupier mortgage holders. 

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