Risk of mortgage stress eases for fourth straight month – the lowest for over 18 months since February 2023
New research from Roy Morgan shows 26.2% of mortgage holders are now ‘At Risk’ of ‘mortgage stress’. The research was conducted in the three months to October 2024 and is 4.1% lower than the June figures prior to the Stage 3 tax cuts that increased household income for Australians.
The level of mortgage holders ‘At Risk’ of ‘mortgage stress’ in October (26.2% of mortgage holders) is the lowest since early last year and has reduced in recent months as rising household incomes, as well as the Stage 3 tax cuts, have lessened the pressure on household finances.
The record high of 35.6% of mortgage holders in mortgage stress was reached in mid-2008.
680,000 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 680,000 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 928,000 (16.7% 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 continue to drop in Summer if the RBA drops interest rates in December
Due to the decline in inflation in recent months Roy Morgan has modelled the impact of a potential RBA interest rate decrease in December 2024 of +0.25% to 4.1%.
In October, 26.2% of mortgage holders, 1,487,000, were considered ‘At Risk’ and this figure is projected to decrease by 12,000 in December to 1,475,000 (25.9% of mortgage holders, down 0.3% points) if the Reserve Bank drops interest rates by +0.25% to 4.10% at its December meeting.
Looking forward into next year, Roy Morgan projects an additional decrease in the number of mortgage holders considered ‘At Risk’ from 1,475,000 in December, down an additional 12,000 to 1,463,000 (25.7% of mortgage holders); and down 24,000 from current figures.
Mortgage Risk projections based on an interest rate decrease of +0.25% to 4.10% in December
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 remain the same.
The latest Roy Morgan unemployment estimates show nearly one-in-five Australian workers are either unemployed or under-employed – 2,926,000 (18.6% of the workforce); (In October Australian unemployment dropped to 9.2% as full-time employment grew and over 100,000 left the workforce).
Although all eyes will be on the Reserve Bank’s interest rate decision in December, 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.
Michele Levine, CEO Roy Morgan, says mortgage stress was down again in October as the Stage 3 income tax cuts eased the burden for many Australians – 26.2% of Australians with a mortgage (down 2.1% points since September and down 4.1% since June) considered ‘At Risk’:
“The latest Roy Morgan data shows 1,487,000 Australians were ‘At Risk’ of mortgage stress in October 2024. The share of mortgage holders ‘At Risk’ (26.2%) has fallen below 1.5 million for the first time this year and is at its lowest for over a year since June 2023.
“The figures for October 2024 represent an increase of 680,000 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 September 2024 showed annual inflation at 2.8% – down 1% point from June 2024. This is the lowest official inflation estimates since early 2021 over three years ago and the first time since the RBA began raising interest rates that inflation has dropped into the RBA’s preferred target range of 2-3%.
“The rapid decline in inflation over the last year has led to hope that the RBA will reduce interest rates in the months ahead. However, the RBA has stated that they are keeping an eye on so-called ‘core inflation’, also known as the ‘trimmed mean’. The latest ‘trimmed mean’ estimate for inflation for the year to September 2024 was still above the desired target range at 3.5%.
“Nevertheless, the decline in inflation pressures is evident and the RBA’s next move in interest rates is likely to be down. For these reasons we have modelled the impact on mortgage stress of a cut to interest rates of +0.25% to 4.1%.
“If the RBA cuts interest rates by +0.25% in early December the level of mortgage stress would decline to 1,475,000 (25.9% of mortgage holders) in December, and down 24,000 to 1,463,000 in January – equivalent to 25.7% of mortgage holders considered ‘At Risk’. This would be the lowest share of mortgage holders considered ‘At Risk’ for over a year since February 2023.
“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 two years (the latest Roy Morgan estimates show 779,000 new jobs created compared to two years 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 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 |
