NA­TION Home­own­ers fail to save for a rainy day

Townsville Bulletin - - NATION - SO­PHIE ELSWORTH

ONE in three mort­gage cus­tomers have lit­tle or no wig­gle room and no buf­fer tucked away in 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 have no fi­nan­cial back- up plan.

The re­view shows one- third of loans have less than one month’s buf­fer.

The RBA said some of those with no buf­fers were on fixe­drate loans that re­strict ex­tra repayments and some were in­vestor mort­gages, the hold­ers of which typ­i­cally 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 two- and- a- half years ahead of sched­uled repayments at ex­ist­ing rates.

In the re­port, the RBA sends out a stern warn­ing to Aus­tralians who have racked up too much debt, stat­ing that while some house­holds have taken ad­van­tage of low in­ter­est rates and made ex­cess mort­gage repayments, oth­ers have sim­ply in­creased their bor­row­ings.

“Higher in­ter­est rates or falls in in­come could see some highly in­debted house­holds strug­gle to ser­vice their debt and so cur­tail their spend­ing,’’ the RBA said.

The cen­tral bank said the bank­ing reg­u­la­tor, the Aus­tralian Pru­den­tial and Reg­u­la­tion Au­thor­ity, should be pleased with the crack­downs on lend­ing, which in­cluded a 30 per cent cap on in­ter­est- only loans for new mort­gages taken out and a 10 per cent bench­mark on in­vestor credit growth.

This has re­sulted in in­vestor lend­ing eas­ing, but at the same time means some bor­row­ers may be pushed out of the mar­ket.

The RBA said: “Some house­holds will not be able to bor­row as much as pre­vi­ously though their smaller loan will be more manageable.”

The re­view also found some bor­row­ers are likely to be stung by higher bor­row­ing costs by ei­ther hav­ing to steer clear of in­ter­est- only loans and switch to prin­ci­pal and in­ter­est deals or be­ing stung by higher in­ter­est rates.

Prop­erty prices na­tion­ally have also weak­ened, with the re­view stat­ing “apart­ment prices have con­tin­ued to record weaker price growth than de­tached hous­ing con­sis­tent with the in­creased rel­a­tive sup­ply of apart­ments”.

CoreLogic data shows na­tional dwelling val­ues rose by 8 per cent in the 12 months to Septem­ber to a me­dian value of $ 540,647.

The RBA board has kept the cash rate on hold at 1.5 per cent since Au­gust last year and fi­nan­cial ex­perts don’t ex­pect any move­ment in the mar­ket un­til 2018.

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