📰1.5 Million Australians Still at Mortgage Risk Despite Recent Improvements
The country's housing market has seen a significant fall in the levels of mortgage stress, with the percentage of mortgage holders at risk falling to 26.2% in October 2024, or about 928,000 people, with Stage 3 tax cuts and increased household incomes the major reason.
However, 680,000 more mortgage holders are under stress than the number recorded before the RBA began increasing interest rates in May 2022. That suggests a large increase in financial stress for households. This is the point of reckoning for those who have been continuously experiencing financial struggles as a result of continuous rate increases since 2022.
The Key points:
Mortgage stress levels have dropped to 26.2% of mortgage holders, the lowest since early 2023, primarily due to Stage 3 tax cuts and rising household incomes
The number of Australians considered 'Extremely At Risk' stands at 928,000, representing 16.7% of mortgage holders
A potential RBA interest rate cut in December could further reduce the number of stressed mortgage holders by 24,000 by January 2025
Employment remains the crucial factor in mortgage stress, with nearly one in five Australian workers either unemployed or under-employed
Why It Matters: This change of mortgage stress level affects the lives of millions of households in Australia and gives serious insight into the country's economic health. The possibility of rate cuts as early as December 2024 promises respite not only for the embattled homeowner but also potentially brings an end to the aggressive rate-hiking cycle that has dominated the past two years and could stabilize the financial landscape. This could have significant implications for consumer spending, housing market stability, and overall economic recovery.
Big Picture: The broader implications extend beyond individual households to the entire Australian economy. With the reduction in mortgage stress, it can be expected that consumer confidence and spending may increase to stimulate economic growth. Historical data indicates that when people have less financial strain, consumer spending has surged and driven economic expansion. Still, with almost one-in-five workers struggling to find decent employment, sustained recovery for the economy is all about maintaining a delicate balance between inflation control and economic stability. Targeted job creation and upskilling programs would contribute to the mitigation of the employment challenges while supporting economic stability.
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