New borrowers are dedicating increasing chunks of their income to their mortgages, and as the RBA begins a rate rise campaign, that’s unlikely to end soon.
Mortgage holders would experience the same hip-pocket pain from a 7 per cent interest rate today as borrowers in the early 1990s felt from 17 per cent rates, as the share of income borrowers dedicate to their mortgages continues to grow, economists have found following the Reserve Bank of Australia’s decision to raise rates on Tuesday.
According to RBA research from 2012, the portion of household income dedicated to mortgage repayments bounced between 20 per cent and just above 30 per cent between 1982 and 2012.Australian Digital marketing founder Rafa Canto is feeling the higher mortgage repayments. The 38-year-old purchased a four-bedroom home in Smiths Lake in regional NSW in November 2021 to enjoy a different lifestyle.
“The other thing is that we’re not too sure about refinancing because we were able to lock in a good rate ... but if we refinance, are we going to get a worse deal on that fixed rate?” It’s a different story for those who bought during the pandemic, and in particular late 2021, as they would still have borrowed at the top of the market after“They borrowed at ultra, ultra-low rates, and they might have been looking at communications from the Reserve Bank that said they didn’t anticipate lifting rates until 2024,” Mr Maloney said.
“But I’d probably be budgeting on a more conservative side and budgeting for larger than expected interest rate hikes,” Mr Lawless said.
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