Mortgage Payments in Australia Reach Highest Level Since GFC

Mortgage holders in Australia are currently dedicating over 20% of their pre-tax income to loan repayments, marking one of the highest levels recorded, according to data from the Commonwealth Bank of Australia (CBA). This significant increase is attributed to rising interest rates and escalating living costs, reminiscent of the financial climate two decades ago, prior to the 2008 global financial crisis. In contrast, households in the late 1990s spent just over 10% of their pre-tax income on mortgages. CBA's CEO, Matt Comyn, highlighted that individuals aged 35 to 44 hold the largest share of mortgage balances and are particularly vulnerable to the impacts of higher interest rates. He anticipates a rise in mortgage arrears in the coming months due to ongoing pressures on real household disposable incomes. Younger Australians, often with lower incomes and limited savings, are especially sensitive to price fluctuations. The financial burden is leading to an increase in households falling behind on mortgage repayments, with the value of "past due" home loans rising from $14.8 billion to $17.6 billion in the last financial year. A significant portion of this increase consists of loans that are severely overdue, with $1.9 billion of CBA's past due loans being 90 to 179 days late, up from $1.2 billion the previous year. The current arrears data may not fully capture the extent of financial distress, as lenders often provide flexibility, such as loan deferments. Additionally, many households prioritize mortgage payments over other debts, leading to increased financial strain outside of home loans. While younger customers have faced challenges, those over 65 have seen a 7% increase in savings, benefiting from rising interest rates on deposits.