High mortgage repayments mean household budgets are stretched enough already, says CoreLogic
.jpg)
High mortgage repayments mean household budgets are stretched enough already, says CoreLogic
High household debt and low savings, caused by mortgage repayments, may have caused the RBA to hold rates for the 15th consecutive month.
“Growth in housing debt has been outpacing the slow growth in household income for some time”, noted RBA governor Phillip Lowe in his monetary policy decision statement.
CoreLogic’s head of research Tim Lawless noted that: “if interest rates were to rise it would likely suck demand out of the economy with mortgagees spending a higher proportion of their income to service mortgage debt.”
Sydney households now spend 48.4% of their gross annual household income on repayments, for a discounted variable rate mortgage, according to CoreLogic. The figure nationally is 37.2%.
Households already cutting back
The difficulty mortgagees would face should rates go up are reflected in a range of figures.
Whilst employment has improved, with unemployment down to 5.5%, wages growth is at a record low and energy costs are also rising.
Caught between mortgage repayments and stagnant incomes, households are already cutting back. Retail spending fell 0.3% in the September quarter, with CoreLogic’s Lawless noting that “a lift in the cash rate would further dampen household consumption, potentially leading to slower economic growth and fewer new employment opportunities.”
No movement until 2019
The RBA could wait until February 2019 to raise rates, according to HSBC’s economists.
Very few economists now predict imminent rate rises: just six of Finder’s 30-strong economists and experts panel expect a rise in the next six months.
Although house price growth is starting to slow in Sydney, it is still strong in Melbourne. Barring a fall in prices or uplift in wages, stressed mortgagees will continue to be a headache for governor Lowe and the RBA.
High household debt and low savings, caused by mortgage repayments, may have caused the RBA to hold rates for the 15th consecutive month.
“Growth in housing debt has been outpacing the slow growth in household income for some time”, noted RBA governor Phillip Lowe in his monetary policy decision statement.
CoreLogic’s head of research Tim Lawless noted that: “if interest rates were to rise it would likely suck demand out of the economy with mortgagees spending a higher proportion of their income to service mortgage debt.”
Sydney households now spend 48.4% of their gross annual household income on repayments, for a discounted variable rate mortgage, according to CoreLogic. The figure nationally is 37.2%.
Households already cutting back
The difficulty mortgagees would face should rates go up are reflected in a range of figures.
Whilst employment has improved, with unemployment down to 5.5%, wages growth is at a record low and energy costs are also rising.
Caught between mortgage repayments and stagnant incomes, households are already cutting back. Retail spending fell 0.3% in the September quarter, with CoreLogic’s Lawless noting that “a lift in the cash rate would further dampen household consumption, potentially leading to slower economic growth and fewer new employment opportunities.”
No movement until 2019
The RBA could wait until February 2019 to raise rates, according to HSBC’s economists.
Very few economists now predict imminent rate rises: just six of Finder’s 30-strong economists and experts panel expect a rise in the next six months.
Although house price growth is starting to slow in Sydney, it is still strong in Melbourne. Barring a fall in prices or uplift in wages, stressed mortgagees will continue to be a headache for governor Lowe and the RBA.
