Struggling with Mortgage Payments? You are Not Alone: 1.2 Million Aussie Households Affected

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The impact of rising mortgage rates on Australian households is a growing concern, according to Roy Morgan Research.

The research firm has conducted a study that models the effects of the current 3.1% increase in the Official Cash Rate (OCR) and the possibility of two more 0.25% rate hikes in February and March.

The findings show that 23.9% of Australian mortgage holders, or 1.1 million households, are already categorized as "At Risk," meaning their mortgage payments exceed a certain percentage of their income. This is the highest level of mortgage stress since July 2013.

If the Reserve Bank goes ahead with the 0.25% rate hikes, the study predicts that mortgage stress will affect 1.2 million households, or 26.3% of mortgage holders. Roy Morgan cautions that this is a conservative estimate and does not account for other factors that may affect the ability of households to pay their mortgages, such as job loss.

Since April 2022, average variable mortgage repayments have increased by 41%, and a further 0.5% rate hike could push them up by 48%. This would result in an additional $1,071 per month for a borrower with a $500,000 variable mortgage.

Another factor adding to the stress on mortgage holders is the expiration of rock-bottom fixed mortgage rates that were offered during the pandemic. Approximately 40% of mortgages originated during this period had rates of around 2.25%, and two-thirds of these will reset to higher rates by the end of 2023, putting even more pressure on already stressed household budgets.

Published:Monday, 30th Jan 2023
Author: Paige Estritori

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Knowledgebase

Interest Rate Lock:
An agreement between a borrower and a lender that allows the borrower to lock in the interest rate on a mortgage for a specified time period.

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Struggling with Mortgage Payments? You are Not Alone: 1.2 Million Aussie Households Affected

Struggling with Mortgage Payments? You are Not Alone: 1.2 Million Aussie Households Affected

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