Mortgage risks are rising but are they still understated by the RBA?

The Reserve Bank keeps telling us everything is OK, that Australia is still on the narrow path to conquering inflation without a recession and that most home owners are coping with higher interest rates. That sounds benign but, as you can see, those pre-pandemic levels were actually above the arrears peak seen the last time interest rates rose, as Australia's economy recovered from the global financial crisis. And that's an unrealistically low minimum estimate, the real number of voluntary forced sales would be much higher — I've seen a couple of likely candidates just within a couple of blocks from my home. Research company Roy Morgan's mortgage stress index shows the proportion of Australian housing borrowers "at risk" of mortgage stress remains above 30 per cent, which is the highest since the global financial crisis peak. Loading The Reserve Bank's own research, using its "securitisation dataset" — derived from a bundle of loans that banks have used as collateral to borrow money from the central bank — estimates around 5 per cent of borrowers are "cash flow negative", that is they are spending more on mortgage repayments and essentials than what they're earning.