distancing itself from this position and recent homebuyers are expected to be hit hardest by such a policy shift.
At a time when the RBA insisted that rates will not to start rising until 2024, many homebuyers were attracted by very low interest rates. “Our fixed is just under 2 per cent and our variable is about 2.1 per cent,” Eliot Hastie, one such buyer who bought a flat in Surry Hills, the inner-Sydney suburb, said. However, since then the central bank has changed its tune, merely saying it was “prepared to be patient” on lifting rates. Analysts and markets are now becoming increasingly certain rates could rise sooner than previously flagged by the apex bank, despite the economic downturn triggered by the Delta variant of COVID-19. As the RBA’s patience begins to wear thin, households are told to brace themselves for rate hikes, which are expected to have a particular impact on recent homebuyers.
A rate increase by the Reserve Bank would be the first in over a decade and according to experts, millions of Australians are ill-prepared for such a move. Martin North, an analyst who surveys thousands of households across the Pacific nation about their financial position said many Australians were under pressure even before variable mortgage rates started to rise. “If I compare the number in stress now, [compared to] pre-COVID, it’s up by 10 per cent,” he said. “So we’ve got many more people in financial difficulty.”
According to North, about 1.5 million Australian households with a home loan are under financial stress, which refers to when they spend more than they earn. He added that the situation is grimmer for over 2 million households which took out a mortgage or refinanced within the past two years. The financial expert also said the number of recent borrowers already in mortgage stress are particularly higher in certain hotspots which are mainly on new housing growth areas like Leumeah in Sydney, Narre Warren in Melbourne, Toowoomba west of Brisbane and Tapping in Perth.
However, further assessment shows that mortgage stress is no longer just an outer-suburban problem. “You then start to see some more affluent suburbs also being hit, for example Dee Why in the Sydney area,” North said. “So this is an issue not just in those who typically extend themselves, first time buyers or those on the urban fringe, but there are other types of households who are also now feeling the pinch.”
