New data from Roy Morgan highlights a worrisome trend for Australian homeowners as the nation grapples with rising interest rates.
A staggering 1.43 million mortgage holders, or 28.7 per cent, are currently facing the risk of ‘mortgage stress,’ a number not seen in over 15 years. The recent period from February to June 2023 saw two consecutive interest rate increases of 0.25 per cent, bringing official rates to 4.1 per cent in June.
Record high ‘at risk’ mortgage holders
During the three months leading up to June 2023, the number of Australians considered ‘At Risk’ of mortgage stress stood at 1.43 million, marking the equal highest figure in over a decade. This level was last witnessed in May 2008. The data, compiled from Roy Morgan’s Single Source Survey, indicates that interest rate hikes over the past year have impacted mortgage holders significantly. With the Reserve Bank of Australia raising rates at twelve of the last fourteen monthly meetings, the official interest rates reached 4.1% in July 2023, the highest level since May 2012.
The surge in ‘At Risk’ mortgage holders is especially concerning, considering it represents an increase of 539,000 Australians in just one year. This growth comes amid a challenging economic landscape characterized by successive interest rate hikes. Although the current figures remain below those seen during the Global Financial Crisis in 2008, there is a heightened possibility of surpassing those levels if interest rates continue to rise.
Disturbing rise in ‘extremely at risk’ category
Notably, the number of mortgage holders classified as ‘Extremely At Risk’ has surged to 943,000, comprising 19.6 per cent of all mortgage holders during the three months to June 2023. This figure is significantly higher than the long-term average of 15.4 per cent over the past 15 years, indicating that a substantial portion of homeowners is teetering on the brink of financial instability.
Projection of further escalation
Roy Morgan analysts have modeled the potential impact of additional interest rate hikes. If the RBA implements two more increases of 0.25 per cent in August and September 2023, the percentage of ‘At Risk’ mortgage holders could surge past 30 per cent by September. This projection raises concerns about the nation’s economic resilience and the potential repercussions for homeowners who may face difficulties in meeting mortgage payments.
The Roy Morgan analysis also highlights that while interest rates garner significant attention, the most significant factor affecting mortgage stress is unemployment or reduced household income. The increase in the number of ‘At Risk’ mortgage holders is a direct result of interest rate hikes combined with the overall economic climate and its impact on employment.
Policy implications
The concerning figures from Roy Morgan’s survey underscore the urgency for policymakers to carefully consider the implications of future interest rate decisions. As the RBA seeks to balance economic growth with inflation control, the well-being of over 1.4 million mortgage holders hangs in the balance. Policymakers must tread carefully to avoid exacerbating the crisis and potentially pushing mortgage stress levels to record highs.
Note: The data is based on the Roy Morgan Single Source Survey, which conducts in-depth interviews with over 60,000 Australians annually, including more than 10,000 owner-occupied mortgage holders.
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