Mortgage stress down following record highs: Roy Morgan

The latest research released by Roy Morgan has found that 1,531,000 mortgage holders (30.3 per cent) were ‘at risk’ of ‘mortgage stress’ in the three months to March 2024.

This has represented the first drop in mortgage stress for 2024, following three consecutive rises in December 2023, January, and February.

March’s figure showed a fall of 98,000 people at risk of mortgage stress from February but still remained slightly above the December figure of 1,527,000.

According to Roy Morgan, the level of mortgage stress in March is the lowest so far this year, with the decline being primarily driven by increased household incomes reducing financial pressure on some mortgagors.

The March figures have shown that the risk of mortgage stress is still well below the record high of 35.6 per cent recorded during the global financial crisis (GFC) due to the larger size of the current day mortgage market in Australia.

Almost two years on from the Reserve Bank of Australia’s monetary policy tightening cycle, the number of Australians entering the ‘at risk’ category has increased by 724,000.

Furthermore, the number of mortgage holders considered ‘extremely at risk’ now sits at 918,000 (18.7 per cent), well above the long-term decade average of 14.4 per cent.

Roy Morgan chief executive Michele Levine said mortgage stress has eased due to a strong job market combined with rising household incomes.

“The pause in rate increases for the last five months since November 2023 has reduced the pressure on mortgage holders and allowed growth in several areas of the economy to ‘catch up’,” Levine said.

“Rising household incomes so far this year have been a significant driver of reducing mortgage stress from the highs above 1.6 million reached in recent months.

“The same reduction in mortgage stress was seen after the RBA paused rate increases for four months from July [to] October 2023.”

Should a rate increase of 0.25 per cent happen during the RBA’s May and June monetary policy meetings (to a total of 4.85 per cent), Roy Morgan has estimated an additional 50,000 people will be considered at risk of mortgage stress by June 2024.

Although it’s believed by bank economists and the market alike that the RBA will likely decide to leave interest rates unchanged at 4.35 per cent, chief executive of Home Loan Experts, Alan Hemmings, recently told The Adviser that the next move for the RBA could see rates go higher.

Hemmings commented that he expects neither the RBA nor the US Federal Reserve to cut interest rates this year.

He explained: “In Australia, our inflation rate is not within our 2–3 per cent band, and the tax cuts in July will also put pressure on inflation, as everyone will have more money to spend. In the US, there are signs that inflation is trending up.

“The next move for the RBA and the Fed could, in fact, be an increase.

“If you look at underlying inflation, there is a marked difference. [Inflation] for goods is definitely down, but for service, which includes items like rent, it’s still sitting above 4 per cent.”

[RELATED: Next RBA move may be an increase: Brokerage CEO]

Written by Adrian Suljanovic

Last Updated: 23 April 2024

Published: 24 April 2024