Mortgage stress top of mind as RBA raises interest rate, yet again

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New research from Roy Morgan shows that an estimated 1.35 million mortgage holders (27.1%) were 'At Risk' of 'mortgage stress' in the three months to March 2023. 

In Roy Morgan's series on at-risk home loans, this is the highest number recorded since September 2008, 1.37 million at that time. 

Not since late 2011 has the proportion of mortgage holders considered 'At Risk' of mortgage stress been so high and the number of Aussies in this category has increased by 590,000 over the last year, says Roy Morgan.

It's worth noting that rapid interest rate rises are a likely contributing factor in this scenario. So the timeframe of Roy Morgan's report is significant because it included a 0.25% interest rate increase that took the official interest rate to 3.6% in early March.

Now with the cash rate moving up yet again in May to 3.85%, mortgage stress is likely to be on the minds of more borrowers.

Suitably, Roy Morgan further separates those home loans at extreme risk. For example, the number of mortgage holders considered 'Extremely At Risk' has increased to 835,000 (17.3%), which is significantly above the long-term average over the last 15 years of 660,000 (15.9%). 

Rate rises and property prices

While there's been a level of stress around mortgage repayments specifically, the Reserve Bank's ongoing rate hike strategy has also impacted property market activity and therefore prices, seeing them drop by more than 8% from early in 2022 through to early 2023. This has subsequently hurt existing property owners by lowering the equity they have in their homes, while their repayments typically spike.

Recent Mozo research explored this issue by analysing those borrowers stuck with a bad (see overly expensive) home loan. That report showed that 75% of homeowners in Australia are at risk of becoming a "home loan hostage" - when the homeowner can’t easily refinance to ‘escape’ their current loan. In this situation, homeowners may not have enough income or equity built up to meet the serviceability requirements of a new home loan, so lenders see them as a red flag.

Though lower property values negatively impact many, it should be said that they have broadly allowed some first-time or would-be buyers a window into the market.

This window of opportunity is only open to some however, because higher interest rates typically make home loans more expensive. It's a complicated mix of factors at play to be sure, but it doesn't have to be an impossible task.

A focal point for buyers of all kinds should be home loan comparison rates, which Mozo can help with. You can start comparing some of the best home loan rates on the market below, giving you a foot in the door on your next property purchase.

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    5.99% p.a. variable
    6.01% p.a.

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  • Fixed Rate

    Owner Occupier, Principal & Interest, <80% LVR

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    6.54% p.a.
    fixed 2 years
    7.10% p.a.

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

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  • Elevate

    Owner Occupier, Principal & Interest, <80% LVR

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    Initial monthly repayment
    6.09% p.a. variable
    6.20% p.a.

    Get competitive rates on loan terms of 5 to 30 years with the Aussie Elevate Home Loan. Structure your loan with up to five splits. Make additional repayments (T&Cs apply). Offset accounts available. Unlimited redraw using your online banking account. Choose from weekly, fortnightly or monthly payments For loan amounts from $10,000 to $5 million.

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  • Basic Home Loan

    Owner Occupier, LVR<60%, Principal & Interest

    interest rate
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    Initial monthly repayment
    6.14% p.a. variable
    6.16% p.a.

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

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  • Mortgage Simplifier

    LVR<80%, Owner Occupier, Principal & Interest

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    6.14% p.a. variable
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    Get a competitive variable rate with ING’s Mortgage Simplifier. Free extra repayments, no monthly or annual fees. Freedom to make free extra repayments or redraws.

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  • Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    interest rate
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    Initial monthly repayment
    6.25% p.a.
    fixed 3 years
    6.20% p.a.

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

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  • Variable Home Loan 90

    Principal and Interest, LVR <90%

    interest rate
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    Initial monthly repayment
    6.04% p.a. variable
    6.06% p.a.

    Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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