Almost 1.5 million Australians now 'at risk' of stress as loan sizes grow
The proportion of Australian mortgage holders considered ‘at risk’ of mortgage stress increased to 28.4% in the three months to June 2025, according to new data from research firm Roy Morgan.
This marks a 1.5-percentage-point rise from May and is the highest level recorded since January 2025, prior to the Reserve Bank of Australia’s (RBA) recent interest rate reductions.
Roy Morgan’s figures show that 1.49 million Australians with home loans were classified as ‘at risk’ in June, up by 684,000 since the RBA began raising interest rates in May 2022. The research also found that 19.7% of mortgage holders – about 1.03 million people – are now considered ‘extremely at risk’, a figure well above the 10-year average of 14.8%. Mortgage stress is most pronounced in New South Wales, with almost a third of mortgage holders considered ‘at risk’.
“This is the highest level of mortgage stress since January 2025, and since the Reserve Bank cut interest rates from a 13-year high of 4.35% in February 2025,” said Michele Levine (pictured right), chief executive officer at Roy Morgan The RBA made an additional interest rate cut in May 2025 to a two-year low of 3.85%, didn’t meet in June, and left interest rates unchanged at its most recent meeting in early July.
“However, although these interest rate cuts have reduced interest rates in the last few months, the latest figures for June show an increase in levels of mortgage stress due to mortgagors borrowing larger amounts and having larger amounts outstanding on existing loans while income growth remains more modest.”
Rising property prices have also contributed to the pressure on borrowers. Average dwelling prices in Australia exceeded $1 million for the first time in the March quarter 2025, and more recent market figures showed that figure continued to increase to new record highs in recent months.
Roy Morgan’s modelling suggests that further rate cuts could ease pressure on borrowers. If the RBA reduces the cash rate by 0.25% in both August and September, bringing it down to 3.35%, the share of mortgage holders ‘at risk’ could fall to 25.5%, or 1,336,000 people.
However, Levine cautioned that the effect of lower rates may be temporary. “These results show although reducing interest rates generally does lead to lower levels of mortgage stress, this effect may only be short-term as new buyers entering the market are able to borrow more money for larger loans to get into the market, thus leading to an increase in mortgage stress,” she said.
There are some positive signs for existing borrowers. “The good news for those already with a mortgage is that the latest ABS monthly inflation estimates for May 2025 showed annual inflation at 2.1%, well below the mid-point of the RBA’s preferred target range of 2-3%,” Levine said. “This is the 10th straight month the official inflation estimates have been within the RBA’s preferred target range of 2-3% – and set to lead to further interest rate cuts.”
Roy Morgan defines mortgage holders as "at risk" if their repayments exceed a certain proportion of household income, and "extremely at risk" if even interest-only payments surpass that threshold. The analysis is based on the assumption that all factors except interest rates remain constant.
Unemployment remains a significant driver of mortgage stress, with Roy Morgan’s latest estimates indicating that 20.3% of the workforce – 3.23 million people – are either unemployed or under-employed.
“It is important to appreciate that interest rates are only one of the variables that determines whether a mortgage holder is considered ‘at risk’ – the largest impact on whether a borrower falls into the ‘at risk’ category is related to household income – which is directly related to employment,” Levine said.
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