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Record 1.5m at-risk mortgage-holders await RBA move

Business

After a dozen rate rises more than 640,000 have joined the ranks of stressed homeowners, the latest Roy Morgan data reveals.

By Philip King 10 minute read

At-risk mortgage-holders have hit a record high of 1.5 million and a further 81,000 will join their ranks if the RBA raises interest rates next week, the latest data from Roy Morgan reveals.

It showed the number of stressed mortgage-holders had surpassed the 2008 GFC figure and almost one-third would fall into that category if the RBA followed a September raise with one in October.

Roy Morgan CEO Michele Levine said 642,000 mortgage-holders had joined the at-risk group since the RBA began its run of 12 interest rate rises since May last year and its next two decisions were critical.

“If the RBA does raise interest rates again next week by 0.25 per cent Roy Morgan forecasts mortgage stress is set to increase to over 1.57 million mortgage-holders (30.2 per cent) considered ‘at risk’ by September 2023,” she said.

“Of even more concern is the rise in mortgage-holders considered ‘extremely at risk’, now estimated at 1,017,000 (20.3 per cent) in July 2023 – the highest for over 15 years since July 2008 (26.2 per cent).”

“If there is a sharp rise in unemployment, mortgage stress is set to increase towards the record high of 35.6 per cent of mortgage-holders considered ‘at risk’ in May 2008 during the GFC.”

Ms Levine said signs that inflation was abating were mixed with rising petrol prices in mid-August –  to an average of more than $2 a litre – due to a decline in the value of the Australian dollar and a harbinger of inflation to come.

“On two occasions during 2022 average retail petrol prices increased to over $2 per litre – in March 2022 and July 2022. On both occasions after petrol prices soared inflation expectations also increased rapidly.”

“The increases to petrol prices are being driven by a decline in the value of the Australian dollar which has now dropped below US65c to its lowest for nearly a year. Although many have suggested the RBA has finished its cycle of interest rate increases, the low Australian Dollar and high petrol and energy prices adding to inflation may force their hand for further interest rate increases in the months ahead.”

Roy Morgan said its modelling predicted that an RBA increase of 0.25 per cent in September to 4.35 per cent would push at-risk mortgage-holders up to 1,577,000, or 30.2 per cent of the total.

If the RBA raised again in October an additional 108,000 would join the stressed group and almost one-third of mortgage-holders would be at risk.

Roy Morgan assessed mortgage holder risk by analysing the proportion of household income devoted to repayments considering income and spending.

Roy Morgan’s Single Source Survey is based on in-depth interviews conducted with over 60,000 Australians each year, including over 10,000 owner-occupied mortgage-holders.

 

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Philip King

Philip King

AUTHOR

Philip King is editor of Accountants Daily and SMSF Adviser, the leading sources of news, insight, and educational content for professionals in the accounting and SMSF sectors.

Philip joined the titles in March 2022 and brings extensive experience from a variety of roles at The Australian national broadsheet daily, most recently as motoring editor. His background also takes in spells on diverse consumer and trade magazines.

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