Mortgage struggle warning
ONE in three mortgage customers have little or no wiggle room and have neglected to have a buffer tucked away in the case of future rate hikes, the central bank has warned.
The Reserve Bank of Australia’s biannual Stability Review released yesterday found while some mortgage customers are well ahead of their loans, a large chunk of borrowers have no financial back-up plan. The review shows onethird of loans have less than one month’s buffer.
The RBA said some of those with no buffers are on fixedrate loans that restrict extra repayments and some are investor mortgages where typically these types of borrowers have tax incentives not to pay down debt.
But the overall discrepancy in how far ahead people are on their loans varies significantly – many others are maximising record-low interest rates with aggregate mortgage buffers about 2.5 years ahead of scheduled repayments at existing rates.
In the report the RBA has warned Australians who have racked up too much debt, stating while some have taken advantage of low interest rates and made excess mortgage repayments others have simply increased their borrowings.