Despite catastrophic predictions of the fixed rate mortgage ‘cliff’ that has generated headlines for months and sowed fears of widespread defaults and increasing arrears, household borrowers have, so far, weathered the interest rate storm.
But with the possibility of fresh rate pain on the horizon, the outlook for borrowers again appears uncertain.
Already one million loans have rolled off super cheap fixed rates to higher variable repayments. Picture: NCA NewsWire /Brenton Edwards “We have seen the peak of the expiring of those fixed rate mortgages,” PropTrack director of economic research Cameron Kushner told NCA NewsWire. Commonwealth Bank, Australia’s largest lender with more than half a trillion dollars worth of home loans on its books, says arrears for loans rolling off fixed rates onto variable rates were aligned with its wider portfolio.
With COVID-19 sweeping the globe, the RBA’s then-strategy of ultra-loose monetary policy, cutting rates to just 0.1 per cent and dishing out support for low cost lending, also helped transform the composition of the home loan market. As a result, fixed-rate borrowers began to closely resemble the characteristics of traditional variable-rate borrowers, and the performance of both fixed and variable rate borrowers started to align.There’s no doubt, however, that many are still facing significant pressure and the impact of soaring interest rates is very uneven across households.
For highly leveraged borrowers – those with loans amounting to at least four times their household income – Ms Bullock noted that one in four mortgagors were unable to cover costs.
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