The 2023 Risk Radar Report from credit bureau Experian shows that recent first home buyers that purchased in 2019 or later are suffering the highest rates of mortgage stress, as well as missed payments.
This follows the sharpest lift in mortgage rates on record:
Source: Justin Fabo (Macquarie Group)
Experian notes that borrowers who originated mortgages from 2019 are three times more likely to miss repayments than those that took out a mortgage before 2015.
Missed repayment rates were also worsening with every new generation of borrower.
Experian director of client advisory Charlotte Rankin said borrowers aged under 25 were suffering the greatest mortgage stress, with stress rates stabilising once borrowers are aged 45 or older.
“Younger mortgage holders are doing it the toughest as they don’t have the savings history as back up for when rate increases have occurred”, Rankin said.
“Younger demographic or newer homeowners probably stretch themselves to get the property”.
“For new (borrowers) it’s a perfect storm where they’ve been assessed at a point when interest rates were ultra low”.
“Now with the (rate) increases that’s putting pressure on ability to repay. We can see that people are trying to reduce their spending and banks are telling us that consumers are using savings buffers to cover costs in the mortgage”, she said.
Younger Australians have also been impacted most heavily by the rapid surge in rents, which have risen around 30% since the beginning of the pandemic:
Both factors explain why younger Australians have cut back the hardest on spending, whereas older Australians who mostly own their homes outright are spending-up big:
The pain of the RBA’s aggressive interest rate hikes and the Albanese government’s mass immigration is hitting younger Australians the hardest.
