Thousands of households who used record-low interest rates to buy into the property market would struggle to survive a small increase in their mortgage repayments, new research shows with warnings people in Australia’s outer suburbs are struggling after COVID-19 lockdowns.
All major banks have started increasing their fixed lending rates as global borrowing costs rise on growing fears of a lift in inflation.Earlier this year, each of the major banks had two-year fixed mortgage rates below 2 per cent while five-year loans could be locked in for under 2.25 per cent. Fixed rates have now increased by up to 0.75 percentage points.
The survey found 57 per cent of more than 1000 people said they could not afford “at all” a $300 a month increase.Among those with a gross weekly income of between $2000 and $3000, 46 per cent surveyed said they would struggle to meet such an increase. RBA governor Philip Lowe has repeatedly argued the bank does not expect the official cash rate to start increasing until 2024.“Many Australians are clearly on the brink and are sleepwalking into disaster, living in the false hope that rates will stay this low,” he said.
In the June quarter last year, 28 per cent of homeowners in outer suburban areas were worried about the impact of the pandemic on house prices. That’s climbed to 40 per cent. Among renters, it has climbed to 58 per cent from 31. She said the outer suburbs had borne the brunt of COVID-19 restrictions, especially in employment, which had fed into their financial issues.