Reality bites in rates rise

Anglesea region’s most sensitive market

GEELONG region homeowners will have to find thousands of dollars to cover extra interest on their mortgages this year as the market factors in a potential 2.5 per cent rise by Christmas.

Those on lower incomes will be hardest hit, but exclusive PropTrack data weighing up average suburban incomes against median house prices shows expensive postcodes, including seachange spots so popular during the pandemic, are among those most sensitive to a rate rise.

The Reserve Bank raised the official cash rate to 0.35 per cent in the first increase since 2010 – but the market is factoring in a steeper 2.5 per cent rise by the end of the year.

PropTrack economist Angus Moore said saving a deposit had been the main constraint for first-home buyers in recent years, but serviceability, or paying a mortgage, was becoming more of a factor as house prices rose.

“Certainly rising interest rates are going to strain some people,” Mr Moore said.

“No one wants to have to pay more on their mortgage. That said, banks, when they extend a loan, assess your ability to pay it at an interest rate 3 per cent above what they’re actually offering you.”

He said the rises should not force people into arrears or default because of this interest rate rise buffer.

Anglesea was the region’s most sensitive market overall, according to PropTrack’s analysis, which ranked these by share of income needed to service a mortgage on a median-priced home.

But Mr Moore said the top suburbs reflected how pricedout locals had become because those on an expensive suburb’s average income were not buying properties at their neighbourhood’s median price.

The monthly repayments on a mortgage for a median-priced home in Anglesea would increase $670 a month from $4860, if rates rose 1 per cent – the equivalent to a 6.6 per cent increase in repayments as a share of the average two-earner income.

In Barwon Heads, a 1 per cent rate rise would add $740 a month to $5400 repayments.

In first-home buyer hotspots such as Mt Duneed, Leopold or Belmont, monthly repayments as a share of average wages would rise around 3 per cent if rates climbed 1 per cent, or 6 per cent with a 2 per cent increase.

If mortgage holders keep to their current terms, their minimum repayments will go up, but those paying more than the minimum might not notice the change and those who have paid down several years of a 30-year loan could consider refinancing the length.

SEE HOW INTEREST RATE RISES AFFECT YOUR SUBURB ONLINE AT GEELONGADVERTISER.COM.AU