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.
Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.
The Reserve Bank of Australia’s latest retail payments update offers another useful snapshot of how households are managing everyday spending, card use and short-term credit. While payment data is not the same as loan approval data, it can still tell borrowers something important: the way money moves through a household each month can affect how comfortable a lender feels about future repayments. - read more
The Reserve Bank of Australia’s latest lending rate statistics are a useful reminder that personal borrowing costs can vary widely, even when the broader cash rate outlook appears steady. For households considering a car loan, debt consolidation loan or unsecured personal loan, the key issue is not simply whether rates are rising or falling. It is whether the loan being offered is affordable, suitable and competitive for the borrower’s circumstances. - read more
The Reserve Bank of Australia’s latest financial aggregates add another layer to an ongoing story for personal loan borrowers: consumer credit remains an important pressure point for household budgets, even as interest rate settings stay under close watch. - read more
Stepping into the realm of loans and finance can be a daunting endeavor, but it all begins with a solid foundation in personal budgeting. Understanding how to manage your money effectively is not just a skill—it’s a crucial aspect of securing financial stability and achieving peace of mind. By tuning in to your finances and preparing a thought-out plan, you’re setting the stage for a well-informed loan application process. - read more
Embarking on the journey to secure a personal loan can often seem like navigating through a complex financial landscape. Particularly for Australians, where the market is bustling with a multitude of lenders each with their respective criteria and rates, increasing the chances of loan approval is a pursuit that requires insight and preparation. - read more
Before considering a loan application, it's crucial to have a clear understanding of your current financial position. Start by noting down all sources of income, including salary, any additional earnings, or government benefits. This will give you a comprehensive view of your financial inflows. - 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
Bond: A fixed-income investment in which an investor loans money to an entity that borrows the funds for a defined period at a variable or fixed interest rate.
No comments yet. Be the first to share your thoughts.