Australians are defaulting on their home loans at growing rates as the number of borrowers at risk of mortgage stress peaks at levels not seen since 2008, when the global financial crisis hit. Source: ABC News.
The new data, which paints a grim picture of Australia’s cost-of-living crisis, comes as Michelle Bullock prepares to give her first speech as incoming governor of the Reserve Bank of Australia.
Borrowers already feeling the pain of dramatic interest rate rises are also nervously watching what the RBA will do when it meets in the first week of September.
This year, hundreds of thousands of households have rolled off historically low interest rates fixed during the pandemic and another 450,000 home loans will expire next year.
Roy Morgan research released on Monday reveals 1.5 million, or 29 per cent, of borrowers were at risk of mortgage stress in July 2023 – a number higher than during the 2008 global financial crisis.
And while the percentage of affected people is lower than in 2008, the number of Australians at risk is higher due to growth in the population and the number of people in the mortgage market.
The figures show the number of borrowers battling to pay off loans has steadily risen since the RBA began its aggressive run of interest rate rises in May last year.
Suzanne Long from Vinnies WA said she could not remember a time like this in her 12 years as a financial counsellor.
“I think it’s a perfect storm because everything happened at the one time,” she said.
“There’s the increase in cost of living – everything’s gone up – supermarket prices, petrol, insurances and then capped with increase payments in mortgage repayment.
“[Some people] had some small savings buffer there, but they’ve gone through it now and there’s nothing left. Nobody wants to lose their home.”
Growing number of Australians in mortgage stress amid rise in home loan defaults (By Kathryn Diss, ABC News)