At Risk Mortgagors On The Rise
Last updated on December 1st, 2022
Rising interest rates have resulted in an estimated 948,000 mortgagors being “at risk” of mortgage stress, according to new research by Australian research company Roy Morgan. They have estimated that 21.1 per cent of mortgagors were at risk of mortgage stress in the three months to September 2022 following the Reserve Bank of Australia’s (RBA) three consecutive interest rises of 0.5 per cent. With continued rises in October and November, this number is unfortunately increasing.
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Who is at risk?
Roy Morgan classifies mortgage holders as “at risk” if mortgage repayments are greater than a certain percentage of household income. They are considered “extremely at risk” if just the “interest only” component is over a certain portion of household income. Roy Morgan has warned that the current number of “at risk” mortgage holders could rise to a massive 26.2 per cent if the official cash rate hits 3.1 per cent.
How high could repayments go?
With the cash rate forecast to potentially go above 3.0 per cent with another planned rate rise in December, it is expected that that standard variable home loan rate could be as high as 6.61 per cent. With most lenders passing on the full amount of each rate hike, borrowers on a 25-year $500,000 home loan will see monthly repayments being $1,075 more expensive in March 2023 when compared to April 2022.
How much more you will pay. (Based on a 25-year $500,000 home loan)
| Home loan | Monthly repayments |
| Avg. variable interest rate in April 2022 – 2.86% | $2,335 |
| Avg. variable interest rate in March 2023 – 6.61% | $3,410 |
| Increase In Monthly Repayments: | $1,075 |
Now is the time to speak with a mortgage broker
Many Australian mortgage holders are taking the opportunity to review their mortgage now. Competition amongst lenders to take advantage of people changing loans is high meaning there are still plenty of opportunities for borrowers to refinance to a better rate and/or consolidate debt to reduce monthly outgoings.
