RBA cash rate: September pause comes as mortgage stress and refinancing reach record highs

There are now 1.5 million Australian mortgage holders who are considered "at risk" of loan stress, research company Roy Morgan has found.

The figures, which took into account the May and June cash rate increases, found close to 30 per cent of mortgage holders were "at risk" of mortgage stress in July.

The number of Australians at risk surpassed the previous high of 1.46 million seen in May 2008 amid the global financial crisis.

However the proportion of mortgage holders (29.2 per cent) remained below the record high seen in 2008 (35.6 per cent) because of the larger size of the Australian mortgage market today, the report stated.

Roy Morgan considers a mortgage holder "at risk" of mortgage stress if their repayments are more than a certain proportion of their after-tax household income. The amount is between 25 per cent and 45 per cent depending on income and spending.

The number of mortgage holders 'extremely at risk', where the interest-only portion is above the threshold, also increased to 1,017,000, or 20.3 per cent compared to long-term average of 15.4 per cent.

The monthly repayments on a median Canberra house are $2085 higher than before the rate rises began in May 2022, analysis by comparison website Canstar shows.

As mortgage stress increases, home owners have been searching for a better deal on their monthly repayments.

The value of external housing refinancing hit a record high in the latest lending indicators released by the Australia Bureau of Statistics.

In July 2023, the value of all housing refinancing rose 5.4 per cent to a new record high of $21.5 billion. The figure was 21.8 per cent higher compared to the previous year.

Within that figure, owner-occupier refinancing rose 4.9 per cent to a record high of $14.6 billion while investor refinancing rose 6.5 per cent to $7 billion.

Meanwhile the value of new loan commitments fell 1.9 per cent for owner-occupiers and fell 0.1 per cent for investors.

Roy Morgan CEO Michele Levine said while higher interest rates were putting pressure on households, unemployment was the biggest factor in mortgage stress.

"If there is a sharp rise in unemployment, mortgage stress is set to increase towards the record high of 35.6 per cent of mortgage holders considered 'at risk' in May 2008 during the [global financial crisis]," she said.

Ms Levine said any further increases to the cash rate would "spike these numbers even further".

While the risk of mortgage stress was high, the actual numbers of households falling behind on repayments had remained low, according to the RBA.

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In a speech in June, RBA governor Philip Lowe said the board was closely monitoring mortgage arrears.

"These remain very low, although they have increased a little of late," he said.

"Banks report that their customers are managing to make their mortgage payments, although many have had to cut back on other spending. So, it is a complicated picture."

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