The share of mortgage holders ‘At Risk’ of ‘mortgage stress’ fell in July after the Stage 3 tax cuts
New research from Roy Morgan shows there are now 1,604,000 mortgage holders (29.8%) ‘At Risk’ of ‘mortgage stress’ in the three months to July 2024. This represents a decrease of 0.5% points on the June figures after the introduction of the Stage 3 tax cuts in July increased household income for millions of Australians – including many mortgage holders.
The level of mortgage holders ‘At Risk’ of ‘mortgage stress’ in July (29.8% 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 at its next meeting in September.
The record high of 35.6% of mortgage holders in mortgage stress was reached in mid-2008.
797,000 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 797,000 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 982,000 (18.9% 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 – July 2024, n=2,804.
Base: Australians 14+ with owner occupied home loan.
Mortgages ‘At Risk’ set to fall in August after the income tax cuts, but will increase again in September and October if the RBA raises interest rates by +0.25% in September to 4.6%
Roy Morgan has modelled the impact of a potential RBA interest rate increase in September 2024 of +0.25% to 4.6%. Roy Morgan’s mortgage stress forecasts for August, September and October 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 over the last few weeks.
In July, 29.8% of mortgage holders, 1,604,000, were considered ‘At Risk’ and this figure is forecast to fall in August to 1,590,000 (29.5% of mortgage holders) after the impact of the Stage 3 tax cuts.
In September, the number of mortgage holders considered ‘At Risk’ is forecast to fall 4,000 from currently to 1,600,000 (29.7%, down 0.1% points) of mortgage holders even if the RBA raises interest rates in September.
Looking forward into October, the RBA’s interest rate increase in late September will lead to an increase in the number of mortgage holders considered ‘At Risk’ from 1,600,000 in September, up 19,000 to 1,619,000 (30.1% of mortgage holders) in October; and up 15,000 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 September 2024
Source: Roy Morgan Single Source (Australia), May – July 2024, n=3,930.
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 July show nearly one-in-five Australian workers are either unemployed or under-employed – 3,132,000 (19.8% of the workforce); (In July Australian unemployment jumped to 10.1%; highest unemployment for a year since August 2023 as part-time jobs were lost in July following the Mid-Year sales).
Although all eyes are on the latest inflation figures (due out at the end of August) 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 the share of Australians in mortgage stress was down in July with 1,604,000 mortgage holders (29.8%, down 0.5% points) considered ‘At Risk’ as the Stage 3 income tax cuts ease the burden for many Australians:
“The latest Roy Morgan data shows 1,604,000 mortgage holders were ‘At Risk’ of mortgage stress in July 2024, clearly below the record high of 1.63 million reached earlier this year.
“The figures for July 2024 represent an increase of 797,000 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 June 2024 showed annual inflation at 3.8% – down 0.2% points from May 2024. Over the last eight months since November 2023 the ABS monthly inflation figure has averaged 3.8%, indicating the stickiness of the measure so far this year.
“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 $1.80 per litre for a record 58 straight weeks – over a full year.
“For these reasons we have modelled interest rate increases of +0.25% in late September to a potential high of 4.6%. Because of the Stage 3 tax cuts the level of mortgage stress is set to come down in August, before increasing again if there are further interest rates increases.
“Even if the Reserve Bank increases interest rates in late September the level of mortgage stress by October will increase only marginally to 1,619,000 – up 15,000 from the current level – and equivalent to 30.1% of mortgage holders.
“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 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 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 since the highs of early 2024.”
[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.
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.
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 |
