October 22nd 2024.
Around 28.3 per cent of Australians who have taken out a home loan may be facing some financial difficulties, according to new research. This percentage has seen a slight decrease of 2 per cent since the recent tax cuts were implemented in the new financial year. The findings were based on a survey conducted by Roy Morgan over a period of three months, with a sample size of 10,000 individuals who have an owner-occupied mortgage. The results suggest that approximately 1.7 million Australians are currently at risk of experiencing mortgage stress.
Out of this group, around 1.1 million individuals, which accounts for 18.3 per cent of mortgage holders, are considered to be at an extremely high risk. While the figures for September are still higher than the average over the past decade, they are lower than the all-time high of 35.6 per cent recorded during the global financial crisis in 2008. Roy Morgan determines mortgage stress by considering the percentage of income that is used for mortgage repayments, taking into account the individual's income and spending habits. If the interest-only repayments for a home loan exceed a certain portion of the household income, the mortgage holder is classified as being at an extremely high risk.
The implementation of Stage 3 tax cuts has provided some relief for working Australians, resulting in a decrease in mortgage stress over the past few months. However, according to Roy Morgan CEO Michele Levine, there have still been six months this year where at least 1.6 million Australians were considered at risk. The figures from September 2024 show an increase of 917,000 individuals who are at risk since the Reserve Bank of Australia began raising interest rates in May 2022. This was a result of 13 rate increases, raising interest rates by a total of 4.25 percentage points to 4.35 per cent.
If the Reserve Bank of Australia decides to raise interest rates by an additional 0.25 per cent in November, the number of Australians at risk of mortgage stress would increase to 1.75 million, which is equivalent to 28.8 per cent of mortgage holders. Recent data released by the Australian Bureau of Statistics has shown that inflation has slowed down, thanks to lower fuel prices and energy bill relief provided by the federal government. While this puts headline inflation within the RBA's target range of 2-3 per cent, the central bank has stated that interest rates may still go up or down.
During its September meeting, the RBA expressed a cautious approach, stating that they may be forced to increase interest rates in the future, but also acknowledging that an earlier-than-expected cut may be necessary if the economy weakens. These factors, along with the current state of mortgage stress in Australia, highlight the importance of closely monitoring the situation and making informed decisions regarding interest rates to ensure the financial stability of Australian households.
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