Risk of mortgage stress eases for third straight month
New research from Roy Morgan shows 28.3% of mortgage holders are now ‘At Risk’ of ‘mortgage stress’. The research was conducted in the three months to September 2024, and is 2% lower than the June figures prior to the Stage 3 tax cuts that increased household income for millions of Australians.
The level of mortgage holders ‘At Risk’ of ‘mortgage stress’ in September (28.3% of mortgage holders) is set to stabilise over the next few months unless the Reserve Bank board decides to raise interest rates later this year in November and December.
The record high of 35.6% of mortgage holders in mortgage stress was reached in mid-2008.
917,000 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 917,000 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 Australians considered ‘Extremely At Risk’, is now numbered at 1,082,000 (18.3% of mortgage holders) which is significantly above the long-term average over the last 10 years of 14.6%.
Mortgage Stress – % of Owner-Occupied Mortgage-Holders
Base: Australians 14+ with owner occupied home loan.
Mortgages ‘At Risk’ will increase to new record highs in November and December if the RBA raises interest rates
Roy Morgan has modelled the impact of potential RBA interest rate increase in November 2024 of +0.25% to 4.6% and another interest rate increase of +0.25% to 4.85% in December 2024.
In September, 28.3% of mortgage holders, 1,724,000, were considered ‘At Risk’ and this figure is projected to increase by 27,000 in November to 1,751,000 (28.8% of mortgage holders, up 0.5% points) if the Reserve Bank raises interest rates by +0.25% to 4.60% on Melbourne Cup Day in early November.
Looking forward into December, if the RBA raises interest rates by a further +0.25% to 4.85% Roy Morgan projects an increase in the number of mortgage holders considered ‘At Risk’ from 1,751,000 in November, up 34,000 to a new record high of 1,785,000 (29.3% of mortgage holders); and up 61,000 from current figures.
Mortgage Risk projections based on interest rate increases of +0.25% to 4.60% in November 2024 and +0.25% to 4.85% in December 2024
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 show nearly one-in-five Australian workers are either unemployed or under-employed – 2,964,000 (18.7% of the workforce); (In September Australian unemployment increased to 9.5% as workforce grew to a record high; but not enough new jobs created).
Although all eyes will be on the Reserve Bank’s interest rate decision in early November, 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 mortgage stress was down again in September as the Stage 3 income tax cuts eased the burden for many Australians – 28.3% of Australians with a mortgage (down 1.2% points since August and down 2% since June) considered ‘At Risk’:
“The latest Roy Morgan data shows 1,724,000 Australians were ‘At Risk’ of mortgage stress in September 2024. Despite the fall in the share of mortgage holders ‘At Risk’ (28.3%) this is the sixth month this year over 1.6 million were considered ‘At Risk’.
“The figures for September 2024 represent an increase of 917,000 considered ‘At Risk’ since the RBA began raising interest rates 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 quarterly inflation figures for June 2024 showed annual inflation at 3.8% – up 0.2% points from March 2024, although the most recent monthly figures have shown further indications that inflation has softened in July and August. However, over the last 12 months, since September 2023, the ABS monthly inflation figure has averaged at a similar level of 3.8%.
“Although there are signs that inflation is moderating, 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 over two years – a record total of 108 straight weeks since late September 2022.
“For these reasons we have modelled the impact on mortgage stress of interest rate increases of +0.25% to 4.6% on Melbourne Cup Day, in early November, and an additional increase of +0.25% to 4.85% in early December.
“Two additional interest rate increases of +0.25% would increase the level of mortgage stress by 61,000 from current levels to a total of 1,785,000. This would leave the share of mortgage holders considered ‘At Risk’ at 29.3%, up 1% point from the latest figure for September.
“The crucial September quarter inflation figures are due out next week. These figures are expected to have a significant influence on the Reserve Bank’s decisions relating to interest rates over the remainder of the year and at their meetings in early November and December.
“Finally, 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 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 550,000 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 |
