Risk of mortgage stress dropped for a second straight month in March after the Reserve Bank cut interest rates
New research from Roy Morgan shows 26.5% of mortgage holders are now ‘At Risk’ of ‘mortgage stress’, down 1.2% points from a month earlier. The research was conducted in the three months to March 2025 and follows the Reserve Bank’s interest rate cut by +0.25% to 4.1% in late February. This was the first Reserve Bank interest rate cut for over four years since November 2020.
The share of mortgage holders ‘At Risk’ of ‘mortgage stress’ in March (26.5% of mortgage holders) is the lowest for nearly two years since June 2023 – when interest rates were also at 4.1% before a final interest rate increase later that year to a 12 year high of 4.35%.
The record high of 35.6% of mortgage holders in mortgage stress was reached in mid-2008.
644,000 more ‘At Risk’ of mortgage stress nearly three years after interest rate increases began
The number of Australians ‘At Risk’ of mortgage stress has increased by 644,000 since May 2022 when the RBA began a cycle of interest rate increases. Official interest rates are now at 4.10% after the RBA cut interest rates in mid-February for the first time in over four years.
The number of Australians considered ‘Extremely At Risk’, is now numbered at 990,000 (18.5% of mortgage holders) which is significantly above the long-term average over the last 10 years of 14.7%.
Mortgage Stress – % of Owner-Occupied Mortgage-Holders
Source: Roy Morgan Single Source (Australia), average interviews per 3 month period April 2007 – March 2025, n=2,855.
Base: Australians 14+ with owner occupied home loan.
Mortgages ‘At Risk’ set to drop further if the Reserve Bank cuts interest rates in May
Due to the decline in inflation over the last year the Reserve Bank decided to cut interest rates in mid-February 2025 by +0.25% to 4.1%. Due to the Reserve Bank’s decision to cut interest rates Roy Morgan has modelled the impact of an additional RBA interest rate decrease in May 2025 by +0.25% to 3.85%.
In March, 26.5% of mortgage holders, 1,451,000, were considered ‘At Risk’ and this figure is projected to decrease by 13,000 in May 2025 to 1,438,000 (26.2% of mortgage holders, down 0.3% points) if the Reserve Bank cuts interest rates in mid-May by +0.25% to 3.85%.
The share of mortgages considered ‘At Risk’ will drop further, down an additional 14,000 to 1,424,000 in June 2025, equivalent to 26% of mortgage holders – a fall of 27,000 mortgage holders from current figures.
Mortgage Risk projections based on an interest rate decreases of +0.25% in May to 3.85%
Source: Roy Morgan Single Source (Australia), January – March 2025, n=4,777.
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 Roy Morgan uses a conservative forecasting model, essentially assuming all other factors apart from interest rates remain the same.
The latest Roy Morgan unemployment estimates show almost one-in-five Australian workers are either unemployed or under-employed – 3,033,000 (19.3% of the workforce); (In March Australian unemployment dropped to 10.2% as both full-time and part-time employment grew).
Although the Reserve Bank’s decision to cut interest rates in February has clearly had a positive impact and has helped to lower mortgage stress, 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.
Michele Levine, CEO Roy Morgan, says the Reserve Bank’s first interest rate cut in over four years has led to two consecutive monthly falls in mortgage stress in February and March with 26.5% of Australians now considered ‘At Risk’ in March – down 1.2% points on February:
“The latest Roy Morgan data shows 1,451,000 Australians were ‘At Risk’ of mortgage stress in March 2025. The share of mortgage holders ‘At Risk’ (26.5%, down 1.2% points from February 2025) has decreased for a second straight month.
“After increasing for three straight months from October, the RBA’s decision to reduce interest rates by +0.25% to 4.1% in mid-February has now led to back-to-back monthly reductions in mortgage stress which is now at its lowest since June 2023 – when interest rates were first increased to 4.1%.
“Nevertheless, the figures for March 2025 represent an increase of 644,000 considered ‘At Risk’ since the RBA began raising interest rates nearly three years ago in May 2022.
“The latest ABS monthly inflation estimates for February 2025 showed annual inflation at 2.4%, down 0.1% from January and just under the mid-point of the RBA’s preferred target range of 2-3%.
“This is the seventh straight month the official inflation estimates have been within the RBA’s preferred target range of 2-3% and is the driving factor behind the RBA’s decision to lower interest rates in mid-February.
“Even better news for those under mortgage stress is that so-called ‘core inflation’, also known as the ‘trimmed mean’, dropped into the RBA target range of 2-3% for the first time in December 2024 (2.7%) and remains there at 2.7% in February 2025.
“The signs are good there will be further interest rate cuts in the months ahead, as long as official estimates of inflation stay within the 2-3% target range. For these reasons we have modelled the impact on mortgage stress of a cut to interest rates of +0.25% in May to 3.85%.
“If the RBA cuts interest rates by +0.25% to 3.85% in mid-May the number of mortgage holders ‘At Risk’ of mortgage stress would decline to 1,424,000 (26% of mortgage holders) by June 2024. This represents a fall of 27,000 on current figures.
“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 over 900,000 new jobs created compared to April 2022) 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 |
