More than 1.3 million Australian households are under mortgage stress, data shows
The Reserve Bank’s latest interest rate hike has put an additional 100,000 households under mortgage stress, according to new data from financial services company Otivo.
On Tuesday, the RBA hiked the cash rate for the ninth consecutive time, bringing it to 3.35%. That’s up from 3.1% in December and from 0.1% in May.
Tuesday’s hike, and the expectation that more are on the way, has left many Australians struggling to meet their mortgage repayments, The Australian reported.
According to Otivo’s data, more than 1.3 million Australian households are under mortgage stress – defined as when more than 30% of a household’s income is spent on mortgage repayments.
Sydney residents living in Lakemba, Wiley Park, Fairfield, Burwood, Dulwich Hill and Auburn are more likely to face mortgage stress after Tuesday’s rate hike, The Australian reported.
In Melbourne, those living in Flemington, Kensington, Caulfield East, Malvern East, Balwyn, Deepdene and Altona are most likely to struggle.
In Brisbane, the suburbs most likely to face stress are Ascot, Hamilton, New Farm, Teneriffe, Annerly, Fairfield, Ashgrove, Nundah and Wavell Heights.
Many Australians also face a looming “mortgage cliff.” Last week, the RBA forecast that more than 800,000 Australian households are likely to face financial pressure as their fixed-rate mortgages move to more expensive variable rates this year.
More than a quarter of Australians earning between $3,300 and $4,644 per week are now struggling with mortgage repayments, The Australian reported.
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Paul Feeney, founder of Otivo, said that owner-occupiers with a mortgage of $600,000 will see their repayments rise by $125 a month.
“That’s a lot of money for every household going straight into the mortgage,” Feeney told NCA NewsWire.
Affluent areas feel the pinch
Feeney said that even affluent suburbs that can usually afford interest-rate hikes are feeling the pain.
“We’re seeing it across the board; the wealthy suburbs are also suffering. There’s a lot of leverage,” Feeney said. “The more wealthier suburbs have been creeping up the scale in the last six months. People are a lot more overstretched because people have taken out more loan. It’s because [those households are usually] a one-income household. It’s also [that] their mortgages are significantly higher, which means the dollar value is higher.”
Feeney said people should start thinking about how they can prepare financially, as interest rates are likely to keep rising in the coming months.
“People who have the variable fixed rates, reach out to your lender and don’t put your head in the sand,” Feeney told NCA NewsWire. “They’ll help you through this because they don’t want to take your house, so approach them proactively. Another tip is to look at your expenses. If you can reduce your expenses by 5%, put that in cash savings and it’ll create a buffer for you to help with future rate rises. There’s also a lot of financial hardship loans; reach out to them.”
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