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Over 1.57 million Australians are now ‘At Risk’ of ‘mortgage stress’ representing 30.3% of mortgage holders

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New research from Roy Morgan shows a record high 1,573,000 mortgage holders (30.3%) were ‘At Risk’ of ‘mortgage stress’ in the three months to September 2023.

Over 1.57 million Australians are now ‘At Risk’ of ‘mortgage stress’ representing 30.3% of mortgage holders

 

New research from Roy Morgan shows a record high 1,573,000 mortgage holders (30.3%) were ‘At Risk’ of ‘mortgage stress’ in the three months to September 2023. This period encompassed three RBA meetings at which interest rates were left unchanged.

The figures for September represent a new record high, up 7,000 on a month ago.

Over 760,000 more households at risk of mortgage stress after a year of interest rate increases

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The number of Australians ‘At Risk’ of mortgage stress has increased by 766,000 since May 2022 when the RBA began a cycle of interest rate increases. Official interest rates are now at 4.1% in October 2023, the highest official interest rates since May 2012, over a decade ago.

The number of Australians ‘At Risk’ of mortgage stress (1,573,000) is at a record high. The proportion of mortgage holders at 30.3% remains below the record highs reached during the Global Financial Crisis of 15 years ago because of the larger size of the Australian mortgage market today. The record high of 35.6% of mortgage holders in mortgage stress was reached in mid-2008.

The number of mortgage holders considered ‘Extremely At Risk’, is now numbered at 1,043,000 (20.5%) which is now significantly above the long-term average over the last 15 years of 15.3%.

Mortgage Stress – Owner-Occupied Mortgage-Holders

Source: Roy Morgan Single Source (Australia), average interviews per 3 month period April 2007 – September 2023, n=2,759.

Source: Roy Morgan Single Source (Australia), average interviews per 3 month period April 2007 – September 2023, n=2,759.
Base: Australians 14+ with owner occupied home loan.

Mortgages ‘At Risk’ set to increase to over 1.58 million if RBA raises rates by +0.25% in November

Roy Morgan has modelled the impact of two potential RBA interest rate increases of +0.25% in both November (+0.25% to 4.35%) and December (+0.25% to 4.6%).

In September, 30.3% of mortgage holders, 1,573,000, were considered ‘At Risk’ and this would increase to 30.4% of mortgage holders by November 2023 if the RBA increases interest rates next week.

If the RBA raises interest rates by +0.25% in November to 4.35%, there will be 30.4% (up 0.1% points) of mortgage holders, 1,581,000, considered ‘At Risk’ in November 2023 – an increase of 8,000.

If the RBA raises interest rates by a further +0.25% in December to 4.6%, there will be 31.0% (up 0.7% points) of mortgage holders, 1,612,000, considered ‘At Risk’ in December 2023 – an increase of 39,000.

Mortgage Risk at different level of interest rate increases in November & December 2023

Source: Roy Morgan Single Source (Australia), July – September 2023, n=3,836. Base: Australians 14+ with owner occupied home loan.

Source: Roy Morgan Single Source (Australia), July – September 2023, n=3,836. Base: Australians 14+ with owner occupied home loan.

How are mortgage holders considered ‘At Risk’ or ‘Extremely At Risk’ determined?

Roy Morgan considers the risk of ‘mortgage stress’ among Mortgage holders in two ways:

Mortgage holders are considered ‘At Risk’ if their mortgage repayments are greater than a certain percentage of household income – depending on income and spending.

Mortgage holders are considered ‘Extremely at Risk’ if even the ‘interest only’ is over a certain proportion of household income.

Unemployment is the key factor which has the largest impact on income and mortgage stress

It is worth understanding that this is a conservative model, essentially assuming all other factors remain the same. The latest Roy Morgan unemployment estimates for September show almost one-in-five Australian workers are either unemployed or under-employed – 2,893,000 (18.9% of the workforce); (‘Real’ unemployment drops to 10.2% in September – now 2.9 million are unemployed (1.6 million) or under-employed (1.3 million)) – an increase of 129,000 (+0.3% points) on a year ago.

While all eyes are on interest rates the greatest impact on an individual, or household’s, ability to pay their mortgage is not interest rates, it’s if they lose their job or main source of income.

New research from Roy Morgan shows a record high 1,573,000 mortgage holders (30.3%) were ‘At Risk’ of ‘mortgage stress’ in the three months to September 2023.

New research from Roy Morgan shows a record high 1,573,000 mortgage holders (30.3%) were ‘At Risk’ of ‘mortgage stress’ in the three months to September 2023.

Michele Levine, CEO Roy Morgan, says mortgage stress increased to a new record high in September with 1,573,000 mortgage holders considered ‘At Risk’ of mortgage stress as the RBA’s series of 12 interest rate increases continue to flow through to the wider mortgage market:

“The latest Roy Morgan data shows mortgage stress in the Australian housing market has increased to a new record high of 1,573,000 mortgage holders defined as ‘At Risk’ in September 2023. This represents a substantial increase of 766,000 mortgage holders since the RBA began a record-breaking series of interest rate increases nearly eighteen months ago in May 2022.

“The figures for September 2023 take into account all twelve RBA interest rate increases which lifted official interest rates from 0.1% in May last year to 4.1% by June 2023. Since then, the RBA has decided to leave interest rates unchanged at its last four meetings.

“The RBA’s decision to leave interest rates unchanged in recent months came as inflation decreased compared to earlier this year. However, in recent months inflation has ‘reaccelerated’ and moved upwards. The latest ABS CPI monthly figures for the year to September 2023 show Australian inflation at 5.6%, up 0.4% points from August and up 0.7% points over the last two months.

“This is the first time official inflation has increased for two straight months so far this year – the last time was at the cyclical peak in December 2022 at 8.4%. The increases to inflation are not surprising though considering the increase in energy and fuel prices in recent months.

“The average retail petrol price has averaged above $1.90 per litre for a record 12 straight weeks since early August – beating a previous record run at such a high price in May-July 2022. During mid-2022 Inflation Expectations increased rapidly from 5.3% to 5.9% – up 0.6% points. The latest weekly Inflation Expectations data for mid-October shows the measure at 5.2% for the week to October 29 – up 0.3% points since mid-September and averaging 5.3% over the last four weeks.

“The increases to petrol prices are being driven by a decline in the value of the Australian Dollar which dropped below 63 US cents in mid-October to its lowest since November 2022. As long as the Australian Dollar stays low, and petrol prices stay high and even increase further, there will be additional inflationary pressures in the economy.

“These pressures are adding to calls for the RBA to raise interest rates again and are a key factor for why we have modelled two further interest rate increases. If the RBA does raise interest rates next week by 0.25%, Roy Morgan forecasts mortgage stress is set to increase to over 1.58 million mortgage holders (30.4%) considered ‘At Risk’.

“Of even more concern is the rise in mortgage holders considered ‘Extremely At Risk’, now estimated at 1,043,000 in September 2023. This figure has more than doubled since the RBA began raising interest rates, representing an increase of over 560,000 mortgage holders.

“When considering the data on mortgage stress, it is always important to appreciate interest rates are only one of the variables that determines whether a mortgage holder is considered ‘At Risk’. The variable that has the largest impact on whether a borrower falls into the ‘At Risk’ category is related to household income – which is directly related to employment.

“The latest figures on mortgage stress show that rising interest rates are causing a large increase in the number of mortgage holders considered ‘At Risk’ and further increases will spike these numbers even further. If there is a sharp rise in unemployment, mortgage stress is set to increase even more.”

These are the latest findings from Roy Morgan’s Single Source Survey, based on in-depth interviews conducted with over 60,000 Australians each year including over 10,000 owner-occupied mortgage-holders.

 

For more real estate news, click here.

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Cadillac Prepares to Expand Electric Vehicle Lineup in Australia

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Cadillac Lyriq crossover Cadillac EV

Cadillac Prepares to Expand Electric Vehicle Lineup in Australia

 

By Jeff Gibbs

Cadillac is poised to make a significant impact in the Australian market with the launch of its electric vehicle (EV) lineup, beginning with the Cadillac Lyriq crossover. Jess Bala, General Motors (GM) Australia and New Zealand’s managing director, indicated that following the introduction of the Cadillac Lyriq crossover, the luxury brand plans to unveil more models by late 2024 or early 2025.

The company’s initial foray into the Australian market will be marked by the Lyriq, which will be built in right-hand drive at GM’s Spring Hill, Tennessee plant. This move is part of Cadillac’s broader strategy to establish a strong foothold in the EV sector globally. While the Lyriq is set to start, GM has not dismissed the possibility of sourcing future models from China, depending on market dynamics and production strategies.

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GM has already laid the groundwork for additional EVs by securing trademarks in Australia for names like Optiq, Escalade iQ, and Vistiq, hinting at what might be next in their lineup. Bala explained that trademarking globally is a standard part of GM’s process to maintain brand consistency as new vehicles are conceptualized and eventually launched.

Cadillac aims to differentiate itself in the competitive luxury EV market by offering a unique buying experience. The brand will sell vehicles through three ‘Cadillac Experience Centres’ located in Melbourne and Sydney, Australia, and Auckland, New Zealand, rather than traditional dealerships. This direct-to-consumer approach is designed to provide a reimagined luxury buying experience that extends from initial inquiry to long-term vehicle ownership.

Despite aiming for “exclusive volumes,” Bala is confident in the brand’s potential in the Australian market, particularly among luxury buyers who see themselves as trendsetters. The Lyriq will be competitively priced within the mid-sized SUV segment, competing with similar offerings from established European luxury brands like BMW’s iX. In the US, the Lyriq starts at around A$90,000, although specific Australian pricing has not been confirmed but expect a starting price of $150,000.

Cadillac’s commitment to an elevated after-sales experience includes providing consistent, high-end service, emphasizing the ongoing relationship with the customer well beyond the initial purchase.

As Cadillac gears up to expand its presence with a range of EVs, it is clear that the luxury automaker is not only challenging competitors but also redefining the luxury car ownership experience in Australia.

 

For more motoring news, click here.

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Anticipation Builds for RAM 1500 TRX Successor as RAM Signals New Developments

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2025 RAM 1500 RHO

Anticipation Builds for RAM 1500 TRX Successor as RAM Signals New Developments

 

By Jeff Gibbs

As the automotive world continues to evolve, RAM Trucks is not standing still, especially in the high-performance pickup segment. The brand has stirred excitement with a potential successor to the powerful RAM 1500 TRX, as revealed in a LinkedIn post by the company’s marketing chief, Jeff Summers. This post, filled with hidden details from the RAM 1500 RHO’s reveal video, hinted at an even more formidable model in the pipeline.

Current Landscape and Future Potential

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The 2025 RAM 1500 RHO, equipped with a force-fed straight-six engine, aligns with the outputs of other face lifted MY25 RAM 1500 models. Although it marks a significant advancement, it doesn’t directly replace the supercharged 6.2-litre V8-powered TRX known for its raw power and speed. Notably, the RHO’s competitive 0-60 mph acceleration time brings it close to its predecessor’s performance metrics, but enthusiasts and critics know that the TRX’s legacy demands even more.

Clues and Confirmations

In his post, Summers particularly highlighted a dirt bike in the RHO reveal video labeled ‘540’ for horsepower, alongside another bike with a blank label, speculated to represent the horsepower for an upcoming RAM model. This tease suggests that RAM is not only keen on continuing the TRX lineage but is planning to surpass previous benchmarks. RAM CEO Tim Kuniskis further fuelled these speculations at the reveal of the TRX Final Edition by mentioning, “This current chapter in Ram’s high-performance trucks is coming to a close, but it’s not the end of TRX’s story.”

Exploring New Horizons

The speculation around the next TRX includes several exciting powertrain possibilities:

  • Enhanced Six-Cylinder Option: Building on the RHO’s engine, an even more powerful six-cylinder could be in development, pushing the boundaries of what’s possible without a V8.
  • Hybrid Powertrain: Reflecting broader industry trends towards electrification, a hybridised version of the Hurricane engine is a strong contender, potentially offering a blend of traditional combustion power with electric efficiency and torque.
  • Full Electric Configuration: As Stellantis moves towards electrification, a fully electric TRX could transform the concept of high-performance pickups, delivering instant torque and reducing emissions.

Strategic Positioning and Market Impact

The upcoming model is poised to challenge the Ford F-150 Raptor R directly, situating the RHO to contend with the standard F-150 Raptor. This strategic positioning not only diversifies RAM’s offerings but also caters to varying levels of performance needs and preferences within the consumer base.

Expected Timeline and Introduction

Industry insiders anticipate that the new RAM 1500 TRX could be revealed next year as a 2026 model. This timeline allows RAM to perfect the integration of advanced powertrains and perhaps set new standards in truck performance.

Conclusion

As RAM prepares to unveil its next-generation TRX, the automotive community watches with bated breath. With the potential introduction of groundbreaking technologies and powertrains, RAM is not just aiming to continue the TRX legacy; it’s looking to redefine it, ensuring the brand remains at the forefront of the high-performance truck market.

 

For more motoring news, click here.

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Kia’s 4WD SUV based on Tasman ute

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Kia 4WD SUV based on Tasman ute

Kia’s 4WD SUV based on Tasman ute

 

By Jeff Gibbs

Kia is gearing up to introduce a formidable competitor in the rugged SUV market with its latest project, a ladder-frame 4WD based on its Tasman ute. Newly released renders provide a glimpse into what could potentially shake up the segment currently dominated by models like the Toyota LandCruiser Prado.

The vehicle, still under consideration but increasingly likely due to robust international demand, showcases a blocky design, poised to capitalize on Kia’s new ladder-frame platform initially developed for the Tasman. Although details are still forming, the SUV’s concept stems from substantial insights into the ute’s design and capabilities.

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Anticipation for this rugged SUV is growing not just in Australia but globally, with significant interest from markets like the Middle East and South Africa. These regions, known for their preference for powerful engines and robust vehicles, suggest the inclusion of a V6 engine could be pivotal. Kia may likely equip the SUV with the 3.5-litre V6 engine found in models such as the Carnival and Sorento, which delivers approximately 216kW and 355Nm.

However, enthusiasts and potential buyers will need to be patient. Kia’s focus remains on successfully launching the Tasman ute, scheduled for next year, before expanding its line-up. The potential SUV variant could hit the market by 2025 at the earliest.

Kia’s commitment to setting high standards in the utility segment is clear, with aspirations to benchmark the Tasman ute as a top contender. “We’re definitely aiming for (the benchmark),” stated Kia Australia’s product planning chief, Roland Rivero. “We’re not mucking around when it comes to the ute. We want to make sure that the first attempt at a ute from our brand is one that’s going to do well in our market.”

As the automotive landscape braces for Kia’s next big move, the industry and consumers alike are keenly watching what could be a new leader in the tough, versatile SUV category.

 

For more motoring news, click here.

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