But Roy Morgan CEO warns of 'counter-vailing factors' as jobless rate ticks higher
The proportion of Australian mortgage holders ‘at risk’ of mortgage stress has fallen to 25.9% – the lowest level since early 2023 – following three interest rate cuts from the Reserve Bank of Australia (RBA) this year.
Per the latest Roy Morgan data, the drop marks a two-percentage-point improvement from August, suggesting short-term relief to borrowers.
The RBA has made three 25-basis-point cuts this year – in February, May, and August – in response to easing inflationary pressure. As a result, the number of mortgage holders at risk has dipped to 1.36 million.
The share of those deemed ‘extremely at risk’ held steady at 16.3%, matching the 20-year average.
But Roy Morgan chief executive Michele Levine (pictured) warned of “counter-vailing factors” that could lead to a resurgence in mortgage stress down the line.
“As general interest rates are lowered, new buyers entering the market are able to borrow more money for larger loans to buy the best house they can afford at that time, and this, in turn, leads to a subsequent increase in mortgage stress due to the larger size of the average loan,” Levine said.
Interest rates “are only one of the variables that determines whether a mortgage holder is considered ‘at risk’”, Levine said, highlighting household income as having the largest impact on mortgage stress.
While the Australian employment market remains in relatively good shape, the jobless rate ticked up to 4.5% in September – the highest level since 2021. This has led to some speculation that the RBA will cut rates for a fourth time in November.
‘At risk’ borrowers are those whose mortgage repayments exceed 25-45% of their after-tax income, based on the RBA’s standard variable rate and their original loan amount.
“Extremely at risk” borrowers are those whose interest-only payments exceed 25-45% of after-tax income, based on the current loan balance and RBA rates.
