Mortgage stress hit record lows during lockdowns: Roy Morgan

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on November 23, 2021 Fact Checked
Mortgage stress hit record lows during lockdowns: Roy Morgan

For the first time on record, fewer than 600,000 mortgage holders were considered 'at risk' of mortgage stress, new research revealed.

According to Roy Morgan research, NSW, VIC and the ACT saw numbers of those 'at risk' of mortgage stress tumble amid lockdowns.

Throughout the three months to September 2021, Roy Morgan noted an estimated 584,000 mortgage holders (15.8%) were at risk of stress.

This is less than half the level it was during the Global Financial Crisis (GFC) in 2008 when it reached a high of 35.6% of mortgage holders.

Mortgage stress graph.jpg

According to Roy Morgan, this sharp drop was driven by a combination of record low interest rates, government financial aid and support offered by banks and financial institutions. 

Roy Morgan Chief Executive Michele Levine said an analysis of economic factors and mortgages stress since before the GFC has shown that while the single biggest driver of mortgage stress is unemployment, interest rates and economic conditions have some impact on mortgage stress.

"The last year or so has seen low interest rates, but the real reason we see such low levels of mortgage stress is the Government support and mortgage deferrals for those mortgage holders who would otherwise have been at risk," Ms Levine said.

“The Federal Government’s ‘COVID-19 Disaster Payments’ have delivered over $11.9 billion to Australians in financial distress since June while APRA’s figures to September 30, 2021 show mortgages to the value of $11.5 billion have been deferred during the recent lockdowns."

Of the mortgage holders considered at risk in the three months to September 2021, Roy Morgan noted almost two-thirds, 357,000 or 10.3% of all mortgage holders, were considered extremely at risk.

This is down from 388,000 or 11.3% mortgage holders extremely at risk a year ago in the three months to September 2020.

Roy Morgan considers the risk of mortgage stress among mortgage holders in two ways:

  • Mortgage holders are considered 'at risk' if their mortgage repayments are greater than 25-45% of after-tax household income – depending on income and spending.
  • Mortgage holders are considered 'extremely at risk' if even the ‘interest only’ portion of their repayments is over a certain proportion of household income.

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Image by Konstantin Evdokimov via Unsplash.

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

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Jacob Cocciolone joined the Savings team in 2021 as a Finance Journalist. Driven by a passion for keeping Australians up to date with the latest financial news and trends, his areas of interest include financial technology, investing, property and motoring.

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