Mortgage stress rises amid lack of rate cuts

In fact, data has shown that mortgage stress affected 26.8 per cent of mortgage holders in November 2024, up 0.5 per cent from October, according to a Roy Morgan report.

This was reportedly caused by the persistent holds on interest rates from the RBA, with the 13-year high of 4.35 per cent remaining strong for eight consecutive meetings.

In fact, since the interest rate rises began in May 2022, a reported 707,000 Aussies are more at risk of reporting mortgage stress. Those reported extremely at risk sit at 931,000 people or 16.9 per cent of mortgage holders. This is above the 10-year average of 14.6 per cent.

Roy Morgan CEO Michele Levine recognised government incentives as playing a role in mitigating stress, such as the tax cuts seen in July 2024.

“The latest Roy Morgan data shows 1,514,000 Australians were ‘at risk’ of mortgage stress in November 2024. The share of mortgage holders ‘at risk’ has increased for the first time since the modified Stage 3 tax cuts flowed through to Australians from July,” said Levine.

“The latest ABS monthly inflation estimates for November 2024 showed annual inflation at 2.3 per cent – up 0.2 per cent points from October 2024. This is the fourth straight month the official monthly inflation estimates have been within the RBA’s preferred target range of 2-3 per cent and the measure has averaged 2.4 per cent from August – November 2024.

“The rapid decline in inflation over the last year has led to hope that the RBA will reduce interest rates in the months ahead. However, the RBA has stated that they are keeping an eye on so-called ‘core inflation’, also known as the ‘trimmed mean’. The latest ‘trimmed mean’ estimate for inflation for the year to November 2024 was still above the desired target range at 3.2 per cent.”

However, Levine said that she believes the RBA will cut rates at the February meeting.

“Nevertheless, the decline in inflation pressures is evident and the RBA’s next move in interest rates is likely to be down. For these reasons we have modelled the impact on mortgage stress of a cut to interest rates of 0.25 per cent to 4.1 per cent. If the RBA cuts interest rates by 0.25 per cent in mid-February the level of mortgage stress would decline to 1,488,000 (26.3 per cent of mortgage holders) in February, and down 26,000 to 1,488,000 considered ‘at risk’,” said Levine.

“Finally, 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.

“The employment market has been strong over the last two years (the latest Roy Morgan estimates show 708,000 new jobs created compared to two years ago) and this has provided support to household incomes which have helped to moderate levels of mortgage stress over the last year.”

[Related: Homelessness driven by housing stress, new report reveals]

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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