The mood among Australian mortgage holders continues to worsen after the steepest interest rate hikes in history:
The latest ANZ-Roy Morgan consumer confidence survey showed that confidence among those paying off a home has collapsed to levels around half pre-pandemic levels:
Roy Morgan has released its June mortgage stress survey, which shows that mortgage stress has hit its highest level since May 2008, with 28.7% of mortgage holders considered “at risk”:
Roy Morgan classifies a borrower as “At Risk” if their mortgage payments surpass a predetermined threshold (between 25% and 45%, depending on income and consumption).
The June 2023 figures show 12 RBA interest rate increases that increased the official cash rate from 0.1% in May 2022 to 4.10%.
Roy Morgan predicts that if the RBA raises interest rates one more time (to 4.35%), 30.0% of mortgage holders will be “at risk”.
And if the RBA rises interest rates twice more (to 4.60%), 30.7% of mortgage holders will be “at risk”.
Roy Morgan says that it uses “a conservative model, essentially assuming that all other factors remain constant”.
So, if unemployment increases materially, mortgage stress will be worsen.
I’ll add that nearly 500,000 fixed-rate mortgages are due to expire over the second half of this year:
As these fixed rate mortgages expire, mortgage rates for these borrowers will climb from around 2% to nearly 7%.
Thus, even if the RBA maintains current interest rate levels, Australian mortgage holders will face greater financial hardship as a result of the fixed-rate “mortgage cliff”.
