![]() ![]() “That is adjusting from around a 2% mortgage rate to something closer to the mid-fives,” Lawless says. The RBA expects more than 800,000 households will fall off fixed rates on to more expensive variable rates this year. “So this is making it more and more difficult for people to not only pay their mortgages, but also pay their rent.” ![]() “The price of food, petrol, all sorts of essential costs like energy,” she says. Shroot says “the fact is that the price of everything is going up”. “That tends to be where you start to see mortgage distress becoming more apparent.” The risk of mortgage stress is “more confined to households who have seen some sort of change of circumstance”, Lawless says, such as a diminishment of income or loss of employment. He expects monthly home loan payments to be a particular struggle for recent borrowers. “Partly because of higher interest rates, but also because of the cost of living.” “We are expecting that will push higher into 2023,” Lawless says. For a $750,000 loan, the latest rate increase means an extra $1,362 a month since May. RateCity says this week’s official interest rate rise means the average borrower with a $500,000 loan is likely paying an extra $908 a month since rates started to rise last May. Sign up for Guardian Australia’s free morning and afternoon email newsletters for your daily news roundupĪlmost one-quarter of mortgage holders were at risk of mortgage stress as of December last year – and the number is only expected to get worse. “It is the fact that interest rates have increased by a lot more, and a lot faster and earlier, than what anyone was thinking.”Ĭhambers added: “People probably borrowed more than they could have today.” With borrowing capacities down almost 35% from 12 months ago, “these people wouldn’t get approved today”. “That’s probably the biggest wildcard,” says Tim Lawless, research director at CoreLogic. The RBA has also indicated further rate hikes will be needed in coming months to reduce inflation, which stands at 7.8% and is well clear of the bank’s 2% to 3% target. The official cash rate now stands at 3.35%, its highest level since 2012. However, the RBA has been increasing interest rates since May 2022 in response to soaring inflation. ![]()
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