Mortgage stress plunges to “near record low”

According to Roy Morgan, mortgage stress plunged to a near record low in the three months to May, driven by the lowest mortgage rates on record alongside the rebound in jobs:

New research from Roy Morgan shows an estimated 677,000 mortgage holders (17.3%) were at risk of ‘mortgage stress’ in the three months to May 2021. This period encompassed the end of the JobKeeper wage subsidy (end of March 2021), low community transmission of COVID-19 and only a few ‘short and sharp’ lockdowns and border closures to deal with outbreaks.

This level of mortgage stress is down sharply on a year ago when an estimated 794,000 mortgage holders (19.4%) were at risk during the early stages of the COVID-19 pandemic in the three months to May 2020.

The low rate of ‘At Risk’ mortgages since the pandemic began reflects the improvement in employment conditions in the first half of 2021…

The enduring impact of the record financial support provided to Australians over the last 18 months as well as the record low interest rates, set by the RBA at only 0.1%, are providing an enduring level of support to mortgage holders during 2021 even after much of this support has been withdrawn…

The improvement in mortgage stress makes perfect sense given the collapse in mortgage rates:

Mortgage rates

Mortgage rates at record lows.

Alongside the stimulus-driven rise in household disposable income, which experienced its biggest annual rise since 2008:

Real household disposable income per capita

Real per capita household disposable income has broken a decade of stagnation.

Combined, these factors have driven the ratio of debt repayments – both principal and interest – to household disposable income to a 17 year low, according to the Bank for International Settlements:

Australian household debt repayments

Australian household debt repayments have fallen to a 17 year low compared to disposable income.

Meanwhile, Australian households have built up a massive war chest of savings, which suggests they are on aggregate households are in a strong financial position:

Australian household savings

Australian households saved a record $200 billion in the year to March 2021.

Of course, all of this data precedes the latest lockdowns, which could lead to rises in mortgage stress; although this would be mitigated by renewed mortgage repayment holidays and stimulus.

Unconventional Economist

Comments

    • It doesn’t make any sense to me… I think we have 2 Australia’s. Those who bought several years ago have seen there repayments drop and disposable income increase. Those who haven’t bought are facing rent increases and are struggling as much as ever.

      • fitzroyMEMBER

        No doubt. See the postcodes in the growth corridors in Melbourne. It is these mostly younger buyers who are being crunched with the full blessing of the Commonwealth government and opposition and ACTU, banks, universities and the big end of town. The beauty of having an extra 1 million Melburnians in 10 years.

  1. Jumping jack flash

    I’d wager the latest net savings isnt looking as rosy as that old chart implies. It is certainly lower by now, mostly spent on mortgage deposits or saved with the intention of adding to existing deposits to obtain larger/”safer” debt amounts [which will still show up as savings of course].

    The surge in long-dormant and locked out FHB immediately after the release of super pretty much confirms that.

    As for mortgage stress then yes i fully agree that repayment holidays and lower rates contributed to this. Keep in mind that repayment of a colossal wad of debt is often the easy part now, compared to saving up that antiquated 5% minimum deposit which can only be a barrier to growth in the New Economy as house prices rise and wages remain virtually stagnant.

  2. reusachtigeMEMBER

    I’m suffering from a lot more stress because getting relief is a lot more of a hassle at the moment as the girls on Locanto charge a lot more to visit their apartments under these conditions than they charge in the shops and you never know if there will be a sting. I’m just not an incall kind of guy. I’m looking forward to when the shops start sneakily letting you in the back door again like last time.

  3. Landlords must be cleaning up. Lower interest rates and higher rents. As long as they don’t own apartments in inner Melbourne or Sydney at least.

  4. Who would have thought, an aggregate market value 1/5th of the US, with 1/14th of the number of dwellings and around 1/13th of the population and no one’s stressed. We’re overvalued by 60%!

    • Yep – and arrogantly drinking our own Kool-Aid. Harsh reality is that 99% of people cannot out earn the property growth trajectory. Only those with property can leverage into more.

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