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The start of the rate-easing cycle has helped relieve pressure on mortgage holders, Roy Morgan research suggests.
The share of mortgage holders considered at risk of mortgage stress has dropped to its lowest level in nearly two years, according to Roy Morgan research.
More than a quarter (26.5 per cent) of mortgage holders were at risk of mortgage stress in March, down 1.2 percentage points from a month earlier.
Roy Morgan’s Single Source Survey showed that the risk of mortgage stress dropped for a second straight month after the Reserve Bank of Australia (RBA) announced a long-awaited cash rate cut in February, lowering the rate by 25 bps from 4.35 per cent to 4.10 per cent.
Meanwhile, the quantity of mortgage holders considered extremely at risk was numbered at 990,000 or 18.5 per cent of all mortgage holders, significantly above the long-term average over the last decade of 14.7 per cent.
The number of Australians at risk of mortgage stress has increased by 644,000 since the RBA began a cycle of interest rate increases in May 2022.
Borrower strain could ease further
The number of at-risk mortgages will likely drop further if, as is widely expected, the central bank cuts interest rates in May, Roy Morgan said.
The market research firm modelled the impact of an additional 25-bp interest rate decrease in May, finding the share of at-risk mortgage holders would drop 0.3 percentage points from March.
Roy Morgan CEO Michele Levine said the likelihood of more rate cuts should ease mortgage strain.
“The signs are good there will be further interest rate cuts in the months ahead, as long as official estimates of inflation stay within the 2-3 per cent target range,” she said.
“If the RBA cuts interest rates by +0.25 per cent to 3.85 per cent in mid-May the number of mortgage holders at risk of mortgage stress would decline to 1.4 million (26 per cent of mortgage holders) by June 2024. This represents a fall of 27,000 on current figures.”
However, Levine cautioned that interest rates were not the only factor that determines mortgage holder risk, saying that household income – which is directly related to employment – is the most significant factor.
“The employment market has been strong over the last two years (the latest Roy Morgan estimates show over 900,000 new jobs created compared to April 2022) and this has provided support to household incomes which have helped to moderate levels of mortgage stress over the last year,” she said.
[Related: Lenders cement May rate cut call after RBA releases minutes]
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