Around 1 in 5 Australian borrowers are under mortgage stress depsite historically low interest rates, and new research shows this trend is set to stick around.
According to a recent Roy Morgan analysis, around 18.4% of Australian households are currently under mortgage stress.
Unsurprisingly, lowest-income households still face the highest mortgage stress while mortgage risk, or the tendency of a borrower to default, has climbed to 83.2% for households earning under $60,000 per year.
Despite current record-low interest rates, mortgage stress is set to remain high, as income levels are expected to stagnate.
The report, State of the Nation
, revealed that mortgage stress is highest in Tasmania and South Australia where the unemployment figures stand at 6.5% and 6.9%, respectively, above the national average of 5.7%. Mortgage stress is also more significantly felt in regional households than in the cities.
Mortgage stress was at a previous high in 2008 to 2009 when Australians were beset with high interest rates – around double the rate mortgage holders are paying now – and bubble-like price growth.
Yet according to the research, interest rates would have to more than double in order to match the impact of a loss of income on housing stress.
Whilst low income earners remain at risk of default, low interest rates appear to be counter-balancing the default rate more broadly across all mortgage holders.
Further interest rate cuts are forecast to the now historically low cash rate of 1.50%, which should aid in reducing mortgage stress – but only if lenders actually pass the reduction on to consumer.
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