The Australian Bureau of Statistics (ABS) quarterly CPI figures for the year to December 2022 showed Australian inflation reaching a 33-year high of 7.8%, but a new monthly ABS inflation indicator revealed inflation slowing to 7.4% in the year to January 2023. The latest statistics for February 2023 are yet to be released, and they may influence the RBA's decision to halt their series of interest rate increases.

If the RBA does follow the example of central banks overseas and raise interest rates by another 0.25%, Roy Morgan predicts that mortgage stress levels will increase to over 1.45 million by April 2023, marking 28.8% of all mortgage holders-the highest point since September 2011. According to the study, two further interest rate hikes by 25 basis points each will drive the number of mortgage holders considered 'At Risk' up to 31.0% or 1.565 million by May 2023.

Understanding Mortgage Stress Factors

While interest rates are a major contributing factor in determining whether a borrower is 'At Risk', Roy Morgan CEO, Michele Levine explains that household income related to employment is the variable with the largest impact. Losing jobs or a primary source of income has a more significant effect on paying mortgages than interest rates.

In February 2023, a near-record 13.5 million Australians were employed, up by over 600,000 since February 2020 pre-pandemic. The strong growth in the jobs market has attracted more Australians into the labour force, but there are now over 1.5 million unemployed Australians, roughly 10.1% of the workforce, compared to 1.17 million pre-pandemic. Therefore, unemployment is a significant determinant of mortgage stress.

It's important to note that while the number of Australians deemed 'At Risk' of mortgage stress has risen by 514,000 or 8.5% since the last year, this number remains below the record high of 35.6% or 1.45 million during the Global Financial Crisis (GFC) in early 2009. Nonetheless, homeowners may need to start making careful considerations to avoid long-term financial difficulties.

Seek out Expert Advice

With the potential for further interest rate hikes and a rising number of mortgage holders at risk of mortgage stress, it's crucial for homeowners to seek expert advice on how to manage their loans effectively. Consider refinancing to lock in a fixed rate mortgage or explore other options that may be more suitable for your financial situation. Ignoring the situation may lead to long-term financial difficulties.