Back To Listing

64,000 Australians may be saved Mortgage Stress if 0.5% interest rate is passed on by banks

Source: Roy Morgan Research Single Source, Sept 11 – Feb 12, n = 6,231.

The RBA’s announced 0.5% cut in the official cash rate on May 2, 2012, stands to benefit up to 64,000 Australian mortgage holders who may currently be considered to be “At Risk” of failing to repay their mortgages. Queensland and Victoria, in particular, should benefit if the rate cut is passed on in full. These figures are based on the Roy Morgan Single Source of over 50,000 Australians annually.

Roy Morgan Research’s Single Source survey tracks the proportion of Australians with a mortgage, and further, compares that mortgage to the amount they earn as a household. Based on these figures, and using the “Standard Variable Rate” (SVR) published by the RBA, a reduction of the current SVR from 7.4% to 6.9% would reduce the proportion of all Australian home loan borrowers likely to be “At Risk” of failing to keep up with repayments from 18.2% to 16.8% - a reduction of 1.4%. This is equivalent to 64,000 fewer Australians being At Risk on their mortgages.

 

Effect of 0.5% Rate Cut on Number of Australians with Mortgage Stress

Source: Roy Morgan Research Single Source, Sept 11 — Feb 12, n = 6,231.

*Interest rate used to estimate this proportion is 7.5% SVR.

** Interest rate used to estimate this proportion is 7.0% SVR.

“At Risk” defined as those paying more than a particular proportion of their household income (30-45%, depending on household income) in mortgage repayments, at a given Standard Variable Rate and amount initially borrowed on their home loan.

 

Norman Morris, Industry Communications Director, Roy Morgan Research, says:

“Victoria and Queensland would benefit the most from the full reduction in interest rates being passed on to home loan holders, followed by New South Wales and South Australia.

Mortgage Holders (by State) at Risk of Missing Repayments

 

Australia

NSW

VIC

QLD

SA

WA

TAS

At Risk at 7.4% SVR*

18.2

19

20.4

18.8

13.5

14.5

17.7

At Risk at 6.9% SVR**

16.8

17.7

18.6

16.9

12.3

13.6

16.6

Change after 0.5% Reduction

-1.4

-1.3

-1.8

-1.9

-1.2

-0.9

-1.1

Base: Australians 14+ holding home loans. Sept 11 — Feb 12, n = 6,231.
*Interest rate used to estimate this proportion is 7.5% SVR.
**Interest rate used to estimate this proportion is 7.0% SVR.
“At Risk” defined as those paying more than a particular proportion of their household income (30-45%, depending on household income) in mortgage repayments, at a given Standard Variable Rate and amount initially borrowed on their home loan.

“We have seen in our bank satisfaction results over recent years that failure to pass on full rate reductions to home loan customers or making ‘out of cycle’ moves has a major impact on customer satisfaction. It will be followed with great interest how bank customers react to any move.”