Over 5 million Australians experiencing mortgage stress

Photo: Karen Roach
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MORE than five million Australians may be worried about keeping up with mortgage repayments in the coming months, with the Reserve Bank expected to continue lifting interest rates in the face high inflation and low unemployment.

A national survey conducted by Savvy showed 26% of the more than 1,000 respondents cited mortgage payments as a significant cost of living concern, concentrated on those in the 25 to 34 and 35 to 44-year-old brackets (38%).

Other age groups expressed a lower level of concern about mortgage repayments, with one-quarter of those aged 18 to 24, nearly one third 32% aged 45 to 54, 18% from 55 to 64 and just 6% of those aged 65 and over.

When asked to choose their top three responses to mortgage repayment increases resulting from an interest rate rise, 53% of respondents said they would try to cut down on other expenditure to prioritise their mortgage, 28% said they would absorb the increase, and 26% said they will simply grit their teeth and experience mortgage stress.

One-fifth said they’re prepared to change lenders or refinance and 13% will lock in a fixed rate with their current lender.

According to the survey, 44% of Australian mortgage holders spend between $251 and $500 in weekly repayments, 23% spend $501 to $750, and 18% spend $751 and over.

“If that 23% who said they have mortgage repayments $500 to $750 per week were single-income households, they would be in real trouble,” said Savvy CEO Bill Tsouvalas.

“The COVID mortgage holidays are over and for some families, there may not be much left in the tank when it comes to covering mortgage repayments.”

Moody’s is expecting mortgage delinquency rates to rise over the rest of 2022 due to rising inflation, higher interest rates and worsening housing market conditions, but the increase will be moderate as rates remain low overall.

Having increased rates in its last two meetings, the RBA is broadly expected to institute another rise at next month’s meeting.

“How fast we increase interest rates, and how far we need to go, will be guided by the incoming data and the board’s assessment of the outlook for inflation and the labour market,” Reserve Bank governor Philip Lowe told the American Chamber of Commerce in Australia this week.

He does not expect a recession approaching any time soon, and that inflation is expected to hit 7% before the end of the year, up significantly on the current 5.1%.

“If the last two years has taught us anything, it’s that you can’t rule anything out. But our fundamentals are strong, the position of the household sector is strong, and firms are wanting to hire people at record rates. It doesn’t feel like a precursor to a recession,” he said.

Lowe stressed that “there are a lot of positives” in the full scope of Australia’s economy, with household balance sheets still strong, unemployment at a 50-year low and participation at a record high.

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