Aussie mortgage stress plummets to record low

A new survey from Roy Morgan Research has revealed that mortgage stress has plummeted to record lows on account of rock bottom mortgage rates and government stimulus:

New research from Roy Morgan shows an estimated 584,000 mortgage holders (15.8%) were ‘At Risk’ of ‘mortgage stress’ in the three months to September 2021…

‘Mortgage stress’ dropped to record lows during this period with fewer than 600,000 mortgage holders considered ‘At Risk’ for the first time. The level of mortgage stress is down on a year ago during Victoria’s long second lockdown when an estimated 668,000 mortgage holders (18.3%) were considered ‘At Risk’.

The low rate of ‘At Risk’ mortgages during this period continues the trends seen during the pandemic in which record low interest rates, record levels of Government financial support, and considerable measures taken by banks and financial institutions to support borrowers in financial distress have combined to lower ‘mortgage stress’ to record lows. Mortgage stress today is at less than half the level it was during the Global Financial Crisis in 2008 when it reached a high of 35.6% of mortgage-holders…

Mortgage stress

For Australians with negative employment changes due to COVID-19 mortgage stress is higher with 18.7% now in ‘mortgage stress’ – almost 3% points higher than for all mortgage holders. In addition, around one-in-eight, 12.4%, are ‘extremely at risk’…

Mortgage stress

A near record low of only 15.8% of mortgage holders were ‘At Risk’ in September 2021 as mortgage stress plummeted during 2021

In the three months to September 2021, only 15.8% of mortgage holders were ‘At Risk’ (584,000) which is down significantly on a year ago during Victoria’s long second lockdown. In the three months to September 2020 there were 668,000 (18.3%) mortgage holders ‘At Risk’ – the low point for 2020.

The number of mortgage holders ‘At Risk’ increased from the low point a year ago as financial support was gradually withdrawn and peaked at above 800,000 over the summer months when the Northern Beaches area of Sydney was placed into a three-week lockdown and there was concern the whole city would be placed into an extended lockdown.

After peaking in the three months to January 2021 the number of mortgage holders considered ‘At Risk’ has dropped consistently during 2021 as strong employment growth led to a record number of over 13 million Australians employed for the first time in mid-2021. This compares to total employment of under 12 million in March/April 2020 at the start of the pandemic…

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

Record low mortgage rates

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

Household disposable income

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:

Debt repayments to household 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:

Household savings

The recent strong rise in fixed mortgage rates should lift mortgage stress going forward.

Unconventional Economist

Comments

  1. Jumping jack flash

    Looks good!

    Bring on the inflation in prices, and then wages, and we should just manage to ride the global inflation wave to support infinite debt growth, a new golden age of debt, and economic prosperity not seen since 2007.

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