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Potential June Rate Rise Would Push 78,000 More Australians into "Mortgage Risk"

Article No. 761 - June 02, 2008

If the Reserve Bank of Australia (RBA) decides to raise interest rates by .25 base points on June 3, 2008, an estimated 871,000 Australians or 25.2% of owner occupier mortgage holders (‘home borrowers’) would likely be at risk of falling behind in their loan repayments. This is an increase of 2.2% (78,000 Australians). Moreover an estimated 452,000 Australians (13.6% of home borrowers) would be considered to be at ‘Extreme Risk’ — an increase of 13,000 Australians according to a special analysis of Roy Morgan Research’s ‘Mortgage Risk’ data (part of Roy Morgan Single Source).

‘Mortgage Risk’ by Age

Roy Morgan ‘Mortgage Risk’ data also shows that young Australians will be most likely to increase their risk of defaulting on their owner occupied home loans with the potential rise in interest rates in June.

A rise in interest rates would push an additional 0.8% of ‘home borrowers’ aged 18-29 into the ‘Extremely at Risk’ group. This increase would result in 20.0% of this age group finding it very difficult to cover even the interest on their mortgages (i.e. making them extremely at risk of not repaying loans).

Table 1: Mortgage Risk after Potential June 2008 Rate Rise, by Age Groups

	% of Mortgage Borrowers who are at Risk*			% of Mortgage Borrowers who are Extremely at Risk**
	Before June08 Rate Rise	After June08 Rate	% Change	Before June08 Rate Rise	After June08 Rate	% Change
All Australians	23.0	25.2	+2.2	13.2	13.6	+0.4
Aged 18-29	30.3	32.4	+2.1	19.2	20.0	+0.8
Aged 30-44	25.0	27.2	+2.2	14.3	14.8	+0.5
Aged 45-59	17.6	19.8	+2.2	9.3	9.5	+0.2
Aged 60+***	27.2	29.7	+2.5	17.0	17.2	+0.2

Period: 6 months to April, 2008; Sample: 6,054 Australians aged 18+ and with an owner occupied home mortgage

* “At Risk” is based on those paying more than a certain proportion of their household income (30% to 45%) into their loans based on the appropriate Standard Variable Rate reported by the RBA and the amount the respondent initially borrowed.

** “Extremely” at Risk is based on those paying more than a certain proportion of their household income into their home loans based on the cash rate set by the RBA and the amount respondents currently owe on their home loan.

*** The 60+ age group represents only 5.5% of all mortgage holders, and have average asset levels only slightly lower than for the 45-59 age group, providing a buffer to financial adversity.

About Roy Morgan Research

Roy Morgan Research is the largest independent Australian research company, with offices in each state of Australia, as well as in New Zealand, the United States, the United Kingdom and Indonesia. A full service research organisation specialising in omnibus and syndicated data, Roy Morgan Research has more than 65 years’ experiences in collecting objective, independent information on consumers.

In Australia, Roy Morgan Research is considered to be the authoritative source of information on financial behaviour, readership, voting intentions and consumer confidence. Roy Morgan Research is a specialist in recontact customised surveys which provide invaluable and effective qualitative and quantitative information regarding customers and target markets.

Similar data is available for New Zealand.

For comments or further detail, please contact:

Howard Seccombe — Roy Morgan Research Finance Industry Director

Howard.Seccombe@roymorgan.com

Telephone: +61 (03) 9223 2427 Mobile: 0434 602 386

Michele Levine — Roy Morgan Research Chief Executive Officer

Email: Michele.Levine@roymorgan.com

Telephone: +61 (03) 9224 5215 Mobile: 0411 129 093