Mortgage stress a danger as loan holidays set to end

An estimated 783,000 mortgage holders were at risk of “mortgage stress” in the three months to November 2020, as one in five holders are on loan holidays which are set to end, according to research from Roy Morgan.

This was unchanged on a year earlier in late 2019, but was up from the record lows in the middle of last year when only 668,000 mortgage holders were considered “at risk” between July – September 2020.

The low rate of “At Risk” mortgages during 2020 came during the period of maximum Federal Government support, as well as measures taken by the banks and financial institutions.

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Michele Levine, Roy Morgan chief executive, said as we headed into 2021, the significant support provided by the Federal Government as well as banking and financial institutions was gradually being wound back.

“Both the JobKeeper wage subsidy and JobSeeker COVID-19 supplement are due to expire at the end of March and ‘loan holidays’ provided to mortgage holders in financial stress are also being progressively ended,” Levine said.

“According to the Australian Prudential Regulation Authority (APRA), banks have deferred payments on housing loans valued at $43 billion at the end of December 2020.

“This is down significantly from the value of deferred loans in August 2020 of $160 billion and represents 2.4% of all housing loans.”

Over two-in-three mortgages relied on more than one income and the analysis showed losing even the lower of these two incomes could causes an immediate four-fold increase in the likelihood of those mortgage holders becoming “At Risk” or “Extremely at Risk”.

“The ending of the JobKeeper wage subsidy later next month will put added pressure on up to 1.5 million jobs that were relying on the payment in the December quarter 2020 according to the Australian Treasury,” Levine said.

“That is a huge pool of employees who potentially face a substantial drop in income over the next few months that is set to lead to an increase in mortgage holders falling into an at risk category.”

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