With no end in sight to interest rate increases, new research from Roy Morgan shows an estimated 1,013,000 mortgage holders were at risk of mortgage stress in the three months to October 2022.

This period included two interest rate increases of 50 and 25 basis points in September and October, taking the official interest rate to 2.60% in early October.

Since then, the RBA hiked the cash rate once again by 25 basis points in November to 2.85% - the highest official interest rate seen since May 2013.

Despite the high number of borrowers that are considered at risk of mortgage stress, this number is below the high reached during the global financial crisis in 2009 (1.45 million mortgage holders).

Meanwhile, approximately 619,000 mortgage holders are considered extremely at risk of mortgage stress in the three months to October 2022. 

This is a difference of 77,000 compared to the three months to July 2022.

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Read more: What is mortgage stress?

What is the outlook for 2023?

According to the data, mortgage risk is set to increase to over a quarter of mortgage holders (over 1.1 million) by January 2023 as the RBA is set to hike the cash rate for an eighth straight month in December.

Economists tip it to go as high as 3.85% in early 2023.

To determine how many mortgage holders would be classed as ‘at risk’ in January 2023, Roy Morgan modelled three potential interest rate increases in December.

RBA projected increase Number of mortgage holders at risk in January 2023
25 basis points (3.10%) 1,123,000 (25.1%)
40 basis points (3.25%) 1,132,000 (25.3%)
50 basis points (3.35%) 1,136,000 (25.4%)

The research noted this is a conversative model that assumes all other factors remain the same e.g. unemployment.

Roy Morgan CEO Michele Levine said rising interest rates aren’t the only factor that contributes to mortgage stress.

“It’s important to consider that interest rates are but one variable that determines whether a mortgage holder is considered at risk,” Ms Levine said.

“The variable that has the largest impact on whether a borrower falls into the at risk category is related to household income – which is directly related to employment.

“These figures show that as long as employment levels remain strong the number of mortgage holders considered ‘At Risk’ will not increase to anywhere near the levels experienced during the Global Financial Crisis.”

This comes as new data from the ANZ/CoreLogic Housing Affordability shows the portion of income needed to service a mortgage for an average Sydney home blew out to a record high of 51.1% during the third quarter.

In Melbourne, households also now need to spend a bigger share of their incomes to repay a new loan, which has risen by 4.3 percentage points to 42.4%.

Meanwhile, mortgage serviceability has ballooned by 4.1 percentage points to 45% in Hobart, making the capital the second least affordable housing market in the nation.

“Servicing a mortgage is an area where housing affordability continues to deteriorate and will likely to worsen further given the expected further rise in interest rates,” said Eliza Owen, CoreLogic's Head of Research.

“This shows that the current housing market downturn is not about housing affordability.

“It really comes back to the RBA just trying to contain inflation, but it seems to be creating a bit more pain for mortgage holders.”

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