Almost 20% of all mortgage holders suffered ‘mortgage stress' during March: Roy Morgan

An estimated 828,000 mortgage holders were in ‘mortgage stress’ as Australia entered shutdown in March, according to new research from Roy Morgan.

This equates to roughly 18.2% of all mortgage holders, and  is a significant improvement on those considered to be in mortgage stress 12 months ago and represents the second-lowest level of mortgage stress in over a decade.

The findings were part of Roy Morgan’s latest Single Source Survey, which is based on in-depth interviews conducted with 50,000 Australians each year, including over 10,000 owner-occupied mortgage-holders.

The strong employment market leading up to the COVID-19 related shutdown in mid-March had kept incomes strong while at the same time the decline in interest rates to record lows over the past year has reduced mortgage repayments for many mortgage holders.

A large concern for Australia’s banks will be the impact of COVID-19 on the employment market.

Just over 2-in-3 mortgages rely on more than one income and the mortgage risk is typically very low for these mortgages.

The biggest driver of increased mortgage stress is a sudden drop in income – most often caused by the loss of a job and analysis shows that the impact of the loss of one income quadruples the level of risk for these mortgage holders.

Even a reduction in work caused by being stood down, or cuts to work hours, can have an effect.

A special survey undertaken by Roy Morgan shows that 10.5 million Australians have already reported a change to their employment status caused by COVID-19.

These impacts include having work hours reduced, being stood down, not having any work offered, being made redundant or having pay reduced for working the same number of hours – all of which clearly have a negative impact on income.

The proportion of mortgage holders classified as ‘At Risk’, or ‘Extremely at Risk’, is down on a year ago but those classified as ‘Extremely at Risk’ have increased after hitting a low in October.

In the three months to March 2020, 18.2% of mortgage holders were ‘At Risk’ (828,000), which is down from 21.5% (903,000) in March 2019.

Over the same period those ‘Extremely at Risk’ also decreased from 14.5% (594,000) to 12.6% (559,000), a drop of 35,000.

However, the number ‘Extremely at Risk’ hit a low of only 425,000 (10.7%) in October, following an RBA interest rate cut, and has since increased.