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Research Indicates 1.46 Million Australians are Facing Potential Mortgage Stress

Australians “at risk of mortgage stress” have reached a record high amid increasing interest rates, according to research company Roy Morgan.

The research showed that 1.46 million Australians, representing 29.2 percent of mortgage holders, were at risk of mortgage stress in the three months to July 2023, surpassing the 1.46 million record in the three months to May 2008, when there was still a global financial crisis.

The new record, which saw an additional 642,000 households from last year, came as the Reserve Bank of Australia (RBA) announced two 0.25 percent increases to official interest rates to 4.1 percent in June, the highest since May 2012.

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“The latest figures on mortgage stress show that 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 percent of mortgage holders considered ‘At Risk’ in May 2008 during the GFC,” Roy Morgan CEO Michele Levine said on Aug. 28.

A total of 1.02 million Australians, equivalent to around 20.3 percent of mortgage holders, are now considered “extremely at risk,” Roy Morgan said. The record went significantly beyond the above long-term average of 15.4 percent over the last 15 years.

The research company said that mortgage holders whose repayments comprise 25-45 percent of their household income are considered “at risk.”

Those with higher repayments are categorised as “extremely at risk.”

The number of “at risk” mortgage holders may increase to 1.58 million or around 30.2 percent should the RBA raise the interest rates by another 0.25 percent to 4.35 percent in September, the report said.

A further 0.25 percent hike to bring official interest rates to 4.6 percent in October would also increase the population of “at risk” mortgage holders to 1.6 million equivalent to around 30.7 percent.

“The increases to petrol prices are being driven by a decline in the value of the Australian Dollar which has now dropped below US$0.65 to its lowest for nearly a year since November 2022.

As long as the Australian Dollar stays low and petrol prices stay high, and even increase further, there will be additional inflationary pressures in the economy,” the chief executive said.

“Therefore, 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.”

Ms. Levine said that the “at risk” category is related to household income, which is directly associated with employment, and a sharp rise in unemployment may push the current figures to breach the 35.6 percent of mortgage holders “at risk” in May 2008.

The Australian Bureau of Statistics reported an unemployment rate of 3.6 percent in July 2023. This is slightly above the 3.4 percent recorded in July 2022, the lowest unemployment rate since August 1974.

RBA Governor Philip Lowe said that Australia’s unemployment rate is expected to rise gradually to 4.50 percent in late 2024.

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