Over 1 in 5 experiencing ‘mortgage stress’

The latest research from Roy Morgan, which involved a survey of over 10,000 owner-occupied mortgage holders, found that 20.8 per cent of Australian borrowers were experiencing “mortgage stress”, down from 21.3 per cent in 2017.

The research also found that over the past 12 months, there had been a decrease in the estimated number of mortgage holders considered to be “at risk” (21.3 per cent to 20.8 per cent) and “extremely at risk” (14.9 per cent to 13.5 per cent).

Further, the Roy Morgan research found that levels of mortgage stress “vary extraordinarily” across Australia, with higher levels of “at risk” areas including Sydney residents (26.4 per cent) and those in Western Australia (23.8 per cent) above the overall market average of 20.8 per cent.

Reflecting on the results, Roy Morgan’s industry communications director, Norman Morris, said that while mortgage stress has declined, average loan sizes have remained stable.

“Our research shows that although fewer people have a home loan compared to 12 months ago, the average balance of their loans hasn’t declined,” Mr Morris said.

“This indicates that loans aren’t being paid off quickly, potentially as a result of low interest rates and the use of redraw facilities to use funds for other purposes.”

Mr Morris attributed the decline in mortgage stress over the past 12 months to a “marginal increase in the after-tax household income as a result of reduced tax rates” and a “small reduction” in the average standard variable rate.

However, Mr Morris concluded that market uncertainty has reduced the likelihood to have a continued fall in mortgage stress.

“With the potential for a number of major events to impact mortgage stress levels, such as the [financial services royal commission], interest rates and declining home prices, the future direction of mortgage stress has considerable uncertainty,” the communications director added.

“When rates eventually rise, existing mortgage holders who have borrowed in a low interest rate environment are likely to face increased levels of mortgage stress.

“The final impact, however, will also be determined by what happens to household incomes, which are currently showing very modest growth.”

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