Australians are now spending more than 20% of their pre-tax income on mortgage payments, a level not seen since before the 2008 global financial crisis, according to data from the Commonwealth Bank (CBA). This represents a significant increase from the late 1990s when households allocated just over 10% of their income to mortgage repayments.
The rise in mortgage payments is attributed to increasing interest rates and the high cost of living, placing substantial financial strain on many households. The impact is particularly pronounced among those aged 35 to 44, who hold the highest share of mortgage balances and are most exposed to the effects of rising rates. CBA’s chief executive, Matt Comyn, warned that mortgage arrears are expected to rise further as household disposable incomes are squeezed, with potential future implications on broader economic trends and policy considerations.
The financial pressure leads to many households needing to catch up on their mortgage repayments. The value of “past due” home loans at CBA increased from $14.8 billion to $17.6 billion in the last financial year. A significant portion of these loans, around $1.9 billion, are severely overdue—between 90 and 179 days late—indicating that some borrowers are unlikely to recover without external financial support.
This growing strain is not limited to mortgages. Arrears on credit cards and personal loans have also increased, reflecting some borrowers’ broader financial challenges due to higher interest rates and cost-of-living pressures.
Despite the rising arrears, the situation has yet to pose a significant financial problem for banks, as the rates have only returned to pre-pandemic levels. High house prices have also allowed lenders to recover their money when mortgage holders are forced to sell. However, the speed at which arrears increase is concerning, indicating mounting pressure on households.
Younger Australians, particularly those under 35, feel the pinch most acutely, with their savings depleting rapidly as they make deep cuts to their spending. In contrast, those over 65 have seen a 7% increase in their savings over the past year, benefiting from higher interest rates on deposits.
Moses Samaha, the executive general manager at Equifax’s credit reporting agency, cautioned that any further rise in interest rates or an increase in unemployment could push more households to the brink, potentially widening the impact across other groups that have managed to keep up with their mortgage payments.
CBA has responded by offering 132,000 tailored payment arrangements to customers in need, a proactive step that reassures the audience about the support available. However, the financial strain on Australian households continues to grow, with many prioritising mortgage payments over other debts, leading to mounting financial pressures in other areas.