July 23rd 2024.
The current state of mortgage stress in Australia is reaching a concerning level, with a high number of homeowners facing financial strain. However, there is hope on the horizon as the recently implemented stage 3 tax cuts are expected to bring some much-needed relief in the upcoming months.
According to Roy Morgan, a leading pollster, over 1.6 million homeowners, which is 30.3% of all mortgage holders, are currently at risk of falling into mortgage stress as of June. This is a slight increase from the previous month, but still lower than the record high seen at the beginning of 2024. Despite the ongoing cost-of-living crisis, Roy Morgan anticipates a decrease in the number of households facing mortgage stress in the near future.
One of the major factors contributing to this expected drop is the stage 3 tax cuts, which came into effect on July 1. These tax cuts are predicted to have a significant impact on the country's finances, enough to counteract the effects of two potential interest rate rises in the upcoming months. Roy Morgan CEO Michele Levine explains, "Although interest rate increases typically lead to higher mortgage stress levels, the stage 3 tax cuts are expected to have a greater influence in reducing mortgage stress in the next few months."
Even if the Reserve Bank of Australia (RBA) raises interest rates by 0.25% in both August and September, resulting in a 4.85% interest rate, the number of mortgage holders at risk is still expected to decrease by 24,000 to 1,578,000 by September 2024. This is due to the significant financial relief and increased take-home pay that the tax cuts are providing for millions of Australian taxpayers, including many homeowners.
However, while the end of the year may bring some relief for homeowners, Roy Morgan also highlights some concerning aspects of the economy. Currently, over a million Australians, which is 20% of mortgage holders, are at extreme risk of mortgage stress. This is significantly higher than the 10-year average of 14.5%. Furthermore, the amount of stress in the property sector has risen significantly over the past two years.
Levine emphasizes the alarming statistics, saying, "The figures for June 2024 represent a staggering increase of 795,000 mortgage holders at risk since the RBA began raising interest rates over two years ago in May 2022." She also adds that the persistently high inflation rates, particularly in areas such as petrol prices, are making it even more challenging for homeowners.
In fact, average retail petrol prices have been above $1.80 per litre for a record 53 consecutive weeks, which is a first in history. With these economic challenges in mind, it is essential for homeowners to stay informed and seek out any financial assistance that may be available to them.
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