One in every 20 mortgage holders in Australia is spending more on repayments and other living expenses than what they earn, with tens of thousands at risk of running out of savings this year, according to the Reserve Bank.
In its latest Financial Stability Report released today, the RBA said the Australian economy is in a strong position to weather the risks coming from overseas.
It also found the majority of homeowners are able to cover mortgage and other living costs, but said five per cent of homeowners with a mortgage can't afford their repayments and are spending more than what they earn.
"Around 5 per cent of variable-rate owner-occupier borrowers are estimated to have had expenses exceed their income as interest rates and prices have risen over recent years, leading to an estimated cash flow shortfall," the report states.
"In addition to cutting back their spending to mostly essential items and trading down in quality for some goods and services, these households have had to make other adjustments to continue servicing their mortgages.
"These include drawing down on liquid savings, selling assets and working additional hours.
"Lower-income borrowers are more likely to be in this group."
The suburb where house prices rose over $240k in three months
Savings banked up during the pandemic are helping many of those households to pay for their essentials, but the RBA said a rising number now have less than a six-month buffer left, even if that figure stands at less than 2 per cent.
"The share of borrowers more at risk of falling behind on their loan – that is, those estimated to have a cash flow shortfall and low buffers – has increased over the past two years but still represents less than 2 per cent of variable-rate owner-occupier borrowers," the RBA said.
While low, that figure would still see up to around 100,000 homeowners running out of savings and falling behind on their mortgage payments by October unless interest rates ease or their wages increase.
The report said the financial market is "increasingly optimistic about the prospects for a soft landing in the global economy", but said risks are posed by the likes of China's property slowdown and wider commercial real estate troubles.
It also said there are significant threats to the global economy coming from outside financial markets, such as cyber-attacks, climate change and geopolitical tensions.
