Homeowners are falling into greater risk of mortgage stress despite two interest rate cuts this year, as they are forced to take out higher loans to get into the property market.

Roy Morgan research released this week found almost 1.5 million, or 28.4 per cent, of all mortgage holders are at risk of mortgage stress — where repayments exceed a certain per cent of household income — in the three months to June.

The figure was up 1.5 percentage points on the previous month and the highest level since January — before the Reserve Bank began cutting interest rates.

Mortgage stress was found to be the worst in New South Wales, where almost a third of homeowners were affected, followed by Victoria and Queensland.

This is despite the RBA cutting rates for the first time in more than four years in February, and then again in May.

“Although these interest rate cuts have reduced interest rates in the last few months, the latest figures for June show an increase in levels of mortgage stress due to mortgagors borrowing larger amounts and having larger amounts outstanding on existing loans while income growth remains more modest,” Roy Morgan chief executive Michele Levine said.

Levine added that interest rate cuts were merely a “short-term” solution to mortgage stress, which was rising because new buyers were forced to borrow more money for larger loans to get into the market.

The data comes as the Australian Prudential Regulation Authority opted against relaxing the mortgage serviceability buffer from 3 per cent.

At its current rate, the buffer means lenders must assess whether prospective borrowers could afford a loan they are applying for if interest rates were to rise by 3 per cent.

It has remained at that level since it was raised from 2.5 per cent during the height of the pandemic in October 2021, despite recent calls for it to be relaxed.

The Coalition, as well as industry bodies, have advocated for the buffer to be reduced back to 2.5 per cent.

The Finance Brokers Association of Australia in April found that decreasing the buffer by 0.5 per cent would allow 269,862 more people to access median-valued homes and unlock $276 billion in borrowing capacity, particularly for those aged between 25 and 34.

It would also help relieve loan stress.

“Reducing the serviceability buffer rate from 3 per cent to 2.5 per cent in Australia could significantly ease debt stress for borrowers, particularly in a high-refinancing environment where one per cent of loans change providers monthly,” it wrote in its April report.