New Study Predicts Further Mortgage Stress for Homeowners
New Study Predicts Further Mortgage Stress for Homeowners
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
With persistent interest rate hikes coming from the Reserve Bank of Australia (RBA), a new study by Roy Morgan has revealed that 25.3% or 1.23 million of Australian mortgage holders were classified as 'At Risk' of mortgage stress in the three months leading up to February 2023.
This number marks the highest point since September 2011's 1.3 million, and it's expected to rise even higher if inflation doesn't slow down.
The Australian Bureau of Statistics (ABS) quarterly CPI figures for the year to December 2022 showed Australian inflation reaching a 33-year high of 7.8%, but a new monthly ABS inflation indicator revealed inflation slowing to 7.4% in the year to January 2023. The latest statistics for February 2023 are yet to be released, and they may influence the RBA's decision to halt their series of interest rate increases.
If the RBA does follow the example of central banks overseas and raise interest rates by another 0.25%, Roy Morgan predicts that mortgage stress levels will increase to over 1.45 million by April 2023, marking 28.8% of all mortgage holders-the highest point since September 2011. According to the study, two further interest rate hikes by 25 basis points each will drive the number of mortgage holders considered 'At Risk' up to 31.0% or 1.565 million by May 2023.
Understanding Mortgage Stress Factors
While interest rates are a major contributing factor in determining whether a borrower is 'At Risk', Roy Morgan CEO, Michele Levine explains that household income related to employment is the variable with the largest impact. Losing jobs or a primary source of income has a more significant effect on paying mortgages than interest rates.
In February 2023, a near-record 13.5 million Australians were employed, up by over 600,000 since February 2020 pre-pandemic. The strong growth in the jobs market has attracted more Australians into the labour force, but there are now over 1.5 million unemployed Australians, roughly 10.1% of the workforce, compared to 1.17 million pre-pandemic. Therefore, unemployment is a significant determinant of mortgage stress.
It's important to note that while the number of Australians deemed 'At Risk' of mortgage stress has risen by 514,000 or 8.5% since the last year, this number remains below the record high of 35.6% or 1.45 million during the Global Financial Crisis (GFC) in early 2009. Nonetheless, homeowners may need to start making careful considerations to avoid long-term financial difficulties.
Seek out Expert Advice
With the potential for further interest rate hikes and a rising number of mortgage holders at risk of mortgage stress, it's crucial for homeowners to seek expert advice on how to manage their loans effectively. Consider refinancing to lock in a fixed rate mortgage or explore other options that may be more suitable for your financial situation. Ignoring the situation may lead to long-term financial difficulties.
Published:Friday, 31st Mar 2023 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
The Australian Prudential Regulation Authority (APRA) has announced a significant policy change aimed at curbing potential risks in the housing market. Effective February 2026, APRA will implement a cap on high debt-to-income (DTI) home loans, limiting such loans to 20% of new home lending portfolios. This move is designed to address concerns over escalating property prices and accelerated credit growth. - read more
Afterpay, a leading Australian buy-now-pay-later (BNPL) provider, has raised concerns over certain banking practices affecting its users. Reports indicate that some customers were advised to close their BNPL accounts to qualify for mortgages, only to be subsequently offered credit cards by the same financial institutions. - read more
Australia's major banks-Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), Westpac, and ANZ-are undergoing a strategic shift by reducing their reliance on mortgage brokers. This move aims to protect profit margins in the face of low interest rates, rising operational costs, and intense competition in the home loan market. - read more
As Australians navigate the complex world of finance, understanding the nuances of borrowing can make a significant difference in one’s economic well-being. Being credit-savvy is not just about securing a loan; it's about making informed decisions that align with your long-term financial goals. In this pursuit, comparing loan options emerges as a crucial step for the financially conscious Australian. - read more
When considering personal finance in Australia, personal loans are a handy resource for achieving various financial goals, from consolidating debt to funding a major purchase. Yet, it's essential to approach this financial tool with caution and understanding. Proper comparison of personal loans can be the difference between a financial stepping stone and a stumbling block. - read more
Pre-approval loans are a preliminary step in the loan approval process. They provide borrowers with a conditional commitment from a lender, indicating the maximum amount they are willing to lend, based on the borrower’s financial situation. - read more
Need Help Finding a Loan?
Find out now if you qualify and compare
rates, offers and options from multiple lenders - without a credit check!
All finance quotes are provided free (via our secure server) and without obligation. We respect
your
privacy.
Knowledgebase
Conventional Loan: A type of mortgage loan that is not insured or guaranteed by the government.
