The share of mortgage holders ‘At Risk’ of ‘mortgage stress’ fell for a second straight month in August
New research from Roy Morgan shows there are now 1,659,000 mortgage holders (29.5%) ‘At Risk’ of ‘mortgage stress’ in the three months to August 2024. This represents a decrease of 0.3% points on the July figures after the introduction of the Stage 3 tax cuts increased household income for millions of Australians over the last few months – including many mortgage holders.
The level of mortgage holders ‘At Risk’ of ‘mortgage stress’ in August (29.5% of mortgage holders) is set to fall further over the next few months. However, a reduction in mortgage stress will not happen if the Reserve Bank board decides to raise interest rates later this week.
The record high of 35.6% of mortgage holders in mortgage stress was reached in mid-2008.
852,000 more ‘At Risk’ of mortgage stress more than two years after interest rate increases began
The number of Australians ‘At Risk’ of mortgage stress has increased by 852,000 since May 2022 when the RBA began a cycle of interest rate increases. Official interest rates are now at 4.35%, the highest interest rates have been since December 2011, over a decade ago.
The number of mortgage holders considered ‘Extremely At Risk’, is now numbered at 1,013,000 (18.6% 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 – August 2024, n=2,810.
Base: Australians 14+ with owner occupied home loan.
Mortgages ‘At Risk’ will increase to new record highs in September, October and November if the RBA raises interest rates by +0.25% in September to 4.6% and by +0.25% in November to 4.85%
Roy Morgan has modelled the impact of potential RBA interest rate increase in September 2024 of +0.25% to 4.6% and another interest rate increase of +0.25% to 4.85% in November 2024.
In August, 29.5% of mortgage holders, 1,659,000, were considered ‘At Risk’ and this figure is forecast to increase by 2,000 in September (later this week) to 1,661,000 (29.6% of mortgage holders, up 0.1% points) if the Reserve Bank raises interest rates by +0.25% to 4.60%.
In October, although there is no Reserve Bank meeting next month, an interest rate increase in September will lead to an increase in mortgage holders considered ‘At Risk’ to 1,680,000 (up 21,000 from August), representing 29.9% of mortgage holders (up +0.4% points).
Looking forward into November, if the RBA raises interest rates by a further +0.25% to 4.85% this will lead to an increase in the number of mortgage holders considered ‘At Risk’ from 1,680,000 in October, up 32,000 to a new record high of 1,712,000 (30.5% of mortgage holders, up 1% point); and up 53,000 from current figures.
Mortgage Risk projected forward following with forecast interest rate increases of +0.25% to 4.60% in September 2024 and +0.25% to 4.85% in November 2024
Source: Roy Morgan Single Source (Australia), June – August 2024, n=4,059.
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 the recent Stage 3 income tax changes remain the same.
The latest Roy Morgan unemployment estimates for August show nearly one-in-five Australian workers are either unemployed or under-employed – 2,920,000 (18.6% of the workforce); (In August, Australian real unemployment dropped to 9.1% due to significant increase in part-time jobs).
Although all eyes are on the Reserve Bank’s interest rate decision this week, the fact remains that 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 boosted disposable income for working Australians and eased mortgage stress in recent months, will be nullified by further interest rate cuts in the months ahead.
Michele Levine, CEO Roy Morgan, says the share of Australians in mortgage stress was down in August with 1,659,000 mortgage holders (29.5%, down 0.3% points) considered ‘At Risk’ as the Stage 3 income tax cuts eased the burden for many Australians:
“The latest Roy Morgan data shows 1,659,000 mortgage holders were ‘At Risk’ of mortgage stress in August 2024, only the fifth month this year over 1.6 million mortgage holders were considered ‘At Risk’.
“The figures for August 2024 represent an increase of 852,000 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 July 2024 showed annual inflation at 3.5% – down 0.3% points from June 2024 and down 0.5% points since May 2024. Over the last nine months, since November 2023, the ABS monthly inflation figure has averaged at a similar level of 3.6%.
“The latest ABS figures on inflation show that inflation is still well above 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 $1.70 per litre for nearly two years – a record total of 103 straight weeks since late September 2022.
“For these reasons we have modelled interest rate increases of +0.25% later this week to 4.6% and an additional interest rate increase of +0.25% to 4.85% in early November.
“Two additional interest rate increases of +0.25% both this week, and in early November, would increase the level of mortgage stress by 53,000 from current levels to over 1.7 million for the first time at a total of 1,712,000. This would leave the share of mortgage holders considered ‘At Risk’ at 30.5%, up 1% point from the latest figure for August.
“Although the Reserve Bank is meeting this week, the crucial next monthly inflation figures are due out next week for August. These figures, and the subsequent inflation figures due to be released in the final week of October, will have a large influence on future movements in interest rates.
“However, 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’ – 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 over the last year.”
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 |
