Mortgage stress eases amid lockdowns

By Gerv Tacadena

Mortgage stress levels are at their current lowest on record, with only 15.8% of borrowers at risk.

Mortgage stress among Australian borrowers dropped to record lows amid the lockdowns in biggest capital cities.

Roy Morgan’s latest research shows that around 584,000 mortgage holders were categorised as “at risk” of mortgage stress over the September quarter.

This was the first time on record that the number of mortgage holders at risk was below 600,000.

The recent finding translates to 15.8% of all mortgage holders, lower than the 18.3% recorded during the same period last year.

The level of mortgage stress is down from a year ago during Victoria’s long second lockdown when an estimated 668,000 mortgage holders were considered “at risk”.

It is worth noting that the level of mortgage stress in the current environment is less than half the level it was during the Global Financial Crisis in 2008, when around 35.6% of mortgage holders were at risk.

Roy Morgan chief executive Michele Levine said low interest rates and billions of support programs from the government help mitigate mortgage stress.

“The recent lockdowns, caused by a widespread outbreak of the Delta variant which began in Sydney in June, led to another round of extensive financial support,” she said.

This was supported by the strong employment growth during the first half of 2021.

Ms Levine said as states and territories emerge to the new “COVID-normal”, government support programs and mortgage deferrals will likely cease.

“In addition to the reduction in financial support there is also the prospect of rising inflation to deal with,” she said.

“The threat of rising inflation poses a direct threat to the period of record low interest rates we are currently experiencing.”

This could potentially lead to an increase in the official cash rate, especially if it meets the Reserve Bank of Australia (RBA)’s targets.

“Although the RBA suggests there is no immediate prospect of raising the official interest rate many economic commentators are suggesting this will change in 2022 as inflation starts to rise,” Ms Levine said.

“If Australian inflation does increase substantially that will put upward pressure on interest rates that will in turn lead to a higher level of ‘mortgage stress’ than we are currently seeing.”

Photo by Falaq Lazuardi on Unsplash.

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