New research from Roy Morgan shows an estimated 1.43 million (28.7%) mortgage holders were ‘At Risk’ of ‘mortgage stress’ in the three months to June 2023. This period encompassed two interest rate increases of 0.25% taking official interest rates to 4.1% in June.
This is the equal highest number of mortgage holders considered ‘At Risk’ of mortgage stress (the same as for the three months to May 2023) for over 15 years since there were 1.46 million ‘At Risk’ in May 2008.
Over 530,000 more households at risk of mortgage stress after a year of interest rate increases
The number of Australians ‘At Risk’ of mortgage stress has increased by 539,000 over the last year as the RBA increased interest rates at twelve of the last fourteen-monthly meetings. Official interest rates are now at 4.1% in July 2023, the highest official interest rates since May 2012 over a decade ago.
Despite the sharp increase during the last year the number of Australians in mortgage stress (1,434,000, 28.7% of mortgage holders) remains below the high reached during the Global Financial Crisis in early 2008 of 1,455,000 (35.6%) – although this level is set to be reached with further interest rate increases.
The number of mortgage holders considered ‘Extremely At Risk’, has now increased to 943,000 (19.6%) in the three months to June 2023 which is now significantly above the long-term average over the last 15 years of 15.4%.
Mortgage Stress – Owner-Occupied Mortgage-Holders
Source: Roy Morgan Single Source (Australia), average interviews per 3 month period April 2007 – June 2023, n=2,743.
Base: Australians 14+ with owner occupied home loan.
Mortgage Risk set to increase to over 1.51 million if RBA raises rates by +0.25% in August
Roy Morgan has modelled the impact of two potential RBA interest rate increases of +0.25% in both August (+0.25% to 4.35%) and September (+0.25% to 4.6%).
In June 28.7% of mortgage holders, 1,434,000, were considered ‘At Risk’ and this would increase to over 30% of mortgage holders by September 2023 if these two increases occurred.
If the RBA raises interest rates by +0.25% in August to 4.35% there will be 30.0% (up 1.3% points) of mortgage holders, 1,515,000, considered ‘At Risk’ in August 2023 – an increase of 81,000.
If the RBA raises interest rates by a further +0.25% in September to 4.6% there will be 30.7% (up 2% points) of mortgage holders, 1,551,000, considered ‘At Risk’ in September 2023 – an increase of 117,000.
Mortgage Risk at different level of interest rate increases in August & September 2023
Source: Roy Morgan Single Source (Australia), April – June 2023, n=3,656. 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’ 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’ if even the ‘interest only’ is over a certain proportion of household income.
Unemployment is the factor which has the largest impact on income and mortgage stress
It is worth understanding that this is a conservative model, essentially assuming all other factors remain the same. And of course we are already seeing an increase in unemployment (Australian unemployment increases to 10.3% in June – the highest since January 2023 – June 30, 2023).
While all eyes are on interest rates 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 remained around its highest levels in over a decade in June with 1.43 million mortgage holders considered ‘At Risk’ of mortgage stress as the RBA’s interest rate increases early in 2023 flowed through to the wider mortgage market:
“The latest Roy Morgan data shows mortgage stress in the Australian housing market has remained high with 1.43 million mortgage holders (28.7%) defined as ‘At Risk’ in June 2023, up 539,000 (+8.3% points) on a year ago just after the RBA began a record-breaking series of interest rate rises.
“The figures for June 2023 take into account all twelve RBA interest rate increases which lifted official interest rates from 0.1% in May last year to 4.1% by June. Since then, the RBA has decided to leave interest rates unchanged at its most recent meeting in the first week of July.
“The ABS monthly CPI figures for the year to May 2023 show Australian inflation dropping to 5.6%, down from 6.8% in the year to April 2023. This drop in CPI follows the ANZ-Roy Morgan Inflation Expectations – which also fell in May. However, this monthly decline proved to be short-lived with Inflation Expectations increasing substantially by 0.4% points in June.
“The next ABS monthly, and quarterly, CPI figures for the year to June 2023 are due to be released this week on Wednesday July 26 2023 and will play a key role in the RBA’s determinations about whether to increase interest rates again next week.
“If the RBA does raise interest rates again next week by 0.25% Roy Morgan forecasts mortgage stress is set to increase to over 1.51 million mortgage holders (30.0%) considered ‘At Risk’ by August 2023.
“Of even more concern is the rise in mortgage holders considered ‘Extremely At Risk’, now estimated at 943,000 (19.6%) in June 2023 – the highest for over a decade since September 2011 (22.6%). This is an increase of over 400,000 mortgage holders from a year ago (+7.8% points).
“When considering the data on mortgage stress it is always important to appreciate interest rates are only one of the variables that determines whether a mortgage holder is considered ‘At Risk’. The variable that has 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 latest figures show rising interest rates are causing a large increase in the number of mortgage holders considered ‘At Risk’ and further increases will spike these numbers even further. If there is a sharp rise in unemployment, mortgage stress is set to increase towards the record high of 35.6% of mortgage holders considered ‘At Risk’ in May 2008 during the Global Financial Crisis.”
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.
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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.
 "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.
 "Extremely at Risk" is also based on those paying more than a certain proportion of their after-tax household income 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%|