Mortgage stress increased in June, but set to ease in the months ahead after the Stage 3 tax cuts
New research from Roy Morgan shows there are now 1,602,000 mortgage holders (30.3%) ‘At Risk’ of ‘mortgage stress’ in the three months to June 2024. This represents an increase of 88,000 (+0.6%) on a month earlier but is below the record highs reached earlier this year.
The RBA left interest rates on hold during their June board meeting and there is no RBA board meeting to decide upon interest rates during the current month of July.
The level of mortgage holders ‘At Risk’ of ‘mortgage stress’ in June (30.3% of mortgage holders) is set to fall further over the next few months after the Stage 3 tax cuts were introduced for Australian income earners from the first week of July.
In percentage terms the record high of 35.6% of mortgage holders in mortgage stress was reached in mid-2008. However, with population growth and increased numbers of mortgages in the 14 years since the Global Financial Crisis (GFC), there are now more Australian ‘At Risk’ of mortgage stress.
795,000 more ‘At Risk’ of mortgage stress two years after interest rate increases began
Compared to May 2022, when the RBA began a cycle of interest rate increases, the number of Australians ‘At Risk’ of mortgage stress has increased by 795,000. Official interest rates are now at 4.35%, the highest interest rates have been since December 2011, over a decade ago.
Over a million mortgage holders are now considered ‘Extremely At Risk’ (1,016,000 or 20.0% of mortgage holders) which is significantly above the long-term average over the last 10 years of 14.5%.
Mortgage Stress – % of Owner-Occupied Mortgage-Holders
Source: Roy Morgan Single Source (Australia), average interviews per 3 month period April 2007 – June 2024, n=2,798.
Base: Australians 14+ with owner occupied home loan.
Mortgages ‘At Risk’ set to fall in July, August and September after income tax cuts boost incomes – even if there are further interest rate increases in August and September by +0.5% to 4.85%
Roy Morgan has modelled the impact of potential RBA interest rate increases of +0.25% in August 2024 (+0.25% to 4.6%) and September 2024 (+0.25% to 4.85%). Roy Morgan’s mortgage stress forecasts for July, August and September also take into account the Stage 3 income tax cuts which began in early July and have boosted the take home incomes of many Australians.
In June, 30.3% of mortgage holders, 1,602,000, were considered ‘At Risk’ and this figure is forecast to fall in both July and August, even if the RBA decides to increase interest rates in August by +0.25% to 4.60%.
In August, the number of mortgage holders considered ‘At Risk’ is forecast to fall by 35,000 from currently to 1,567,000 (29.7%, down 0.6% points) of mortgage holders after the impact of the Stage 3 tax cuts.
Looking forward into September, if the RBA decides to increase interest rates by +0.25% to 4.85% in September, that will increase the number of mortgage holders considered ‘At Risk’ in August (1,567,000), up 11,000 to 1,578,000 (29.8% of mortgage holders) in September; but still down 24,000 from current figures.
Mortgage Risk projected forward following income tax cuts in July and a forecast interest rate increases of +0.25% to 4.60% in August 2024 and another of +0.25% to 4.85% in September 2024
Source: Roy Morgan Single Source (Australia), April – June 2024, n=3,843.
Base: Australians 14+ with owner occupied home loan.
How are mortgage holders considered ‘At Risk’ or ‘Extremely At Risk’ determined?
Roy Morgan considers the risk of ‘mortgage stress’ among Mortgage holders in two ways:
Mortgage holders are considered ‘At Risk’[1] if their mortgage repayments are greater than a certain percentage of household income – depending on income and spending.
Mortgage holders are considered ‘Extremely at Risk’[2] if even the ‘interest only’ is over a certain proportion of household income.
Unemployment is the key factor which has the largest impact on income and mortgage stress
It is worth understanding that this is a conservative forecasting model, essentially assuming all other factors apart from interest rates and income tax changes remain the same.
The latest Roy Morgan unemployment estimates for June show over one-in-six Australian workers are either unemployed or under-employed – 2,706,000 (17.3% of the workforce); (In June Australian unemployment dropped to 8.3%; the lowest unemployment since September 2022) – although the good news is that this is down 281,000 on a year ago.
Although all eyes are on the latest inflation figures (due out at the end of July) and their influence on future movements in interest rates, the fact remains the greatest impact on an individual, or household’s, ability to pay their mortgage is not interest rates, it’s if they lose their job or main source of income.
The recent income tax cuts, which have now started boosting disposable income for the vast majority of working Australians, are set to ease mortgage stress for many Australians over the next few months.
Michele Levine, CEO Roy Morgan, says mortgage stress increased in June, with 1.6 million mortgage holders (up 88,000) considered ‘At Risk’, although that number is set to ease over the next few weeks as the Stage 3 income tax cuts ease the burden for many:
“The latest Roy Morgan data shows 1,602,000 mortgage holders were ‘At Risk’ of mortgage stress in June 2024, up 88,000 from May, but still below the record highs reached earlier this year.
“The figures for June 2024 represent an increase of 795,000 mortgage holders considered ‘At Risk’ since the RBA began raising interest rates over two years ago in May 2022. The figures take into account 13 rate increases which raised interest rates by a total of 4.25% points to 4.35%.
“The latest ABS monthly inflation figures for May 2024 showed annual inflation at 4.0% – up 0.4% points from April 2024 and the highest figure this year. The increase in the inflation estimate led to media discussion about whether the RBA would need to once again raise interest rates.
“The renewed increases in inflation in recent months have moved the official level of inflation further away from the Reserve Bank’s preferred target range of 2-3%. In addition, key inflation indicators such as petrol prices remain high – for the first time in history average retail petrol prices have been above $1.80 per litre for a record 53 straight weeks – over a full year.
“For these reasons we have modelled interest rate increases of +0.25% in August and September. However, although interest rate increases would normally lead to a higher level of mortgage stress, the Stage 3 income tax cuts delivered to millions of Australians in early July are set to have a larger impact in driving down mortgage stress over the next few months.
“Even if the RBA increases interest rates by +0.25% in both August and September to 4.85%, the level of mortgage stress would still drop by 24,000 to 1,578,000 mortgage holders (29.8%) considered ‘At Risk’ in the three months to September 2024.
“The latest figures for mortgage stress show that when considering the data, it is important to appreciate that interest rates are only one of the variables that determines whether a mortgage holder is considered ‘At Risk’ of mortgage stress. 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 673,000 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.”
These are the latest findings from Roy Morgan’s Single Source Survey, based on in-depth interviews conducted with over 60,000 Australians each year including over 10,000 owner-occupied mortgage-holders.
To understand more about mortgages in the full context of household finances and the uncertainties caused by the COVID-19 coronavirus and rising interest rates and inflation, ask Roy Morgan.
To learn more about Roy Morgan’s mortgage data, call (+61) (3) 9224 5309 or email askroymorgan@roymorgan.com. Please click on this link to the Roy Morgan Online Store.
About Roy Morgan
Roy Morgan is Australia’s largest independent Australian research company, with offices in each state, as well as in the U.S. and U.K. A full-service research organisation, Roy Morgan has over 80 years’ experience collecting objective, independent information on consumers.
[1] "At Risk" is based on those paying more than a certain proportion of their after-tax household income (25% to 45% depending on income and spending) into their home loan, based on the appropriate Standard Variable Rate reported by the RBA and the amount they initially borrowed.
[2] "Extremely at Risk" is also based on those paying more than a certain proportion of their after-tax household income (25% to 45% depending on income and spending) into their home loan, based on the Standard Variable Rate set by the RBA and the amount now outstanding on their home loan.
Margin of Error
The margin of error to be allowed for in any estimate depends mainly on the number of interviews on which it is based. Margin of error gives indications of the likely range within which estimates would be 95% likely to fall, expressed as the number of percentage points above or below the actual estimate. Allowance for design effects (such as stratification and weighting) should be made as appropriate.
| Sample Size | Percentage Estimate |
| 40% – 60% | 25% or 75% | 10% or 90% | 5% or 95% | |
| 1,000 | ±3.0 | ±2.7 | ±1.9 | ±1.3 |
| 5,000 | ±1.4 | ±1.2 | ±0.8 | ±0.6 |
| 7,500 | ±1.1 | ±1.0 | ±0.7 | ±0.5 |
| 10,000 | ±1.0 | ±0.9 | ±0.6 | ±0.4 |
| 20,000 | ±0.7 | ±0.6 | ±0.4 | ±0.3 |
| 50,000 | ±0.4 | ±0.4 | ±0.3 | ±0.2 |
