Rate rise adds to budget stress
in the Tasmanian electoral division of Clark will take a budget hit when banks pass on the first cash rate rise in 11 years, data shows.
Analysis of REA Group data reveals the jump will add as much as $65 a month to the median mortgage in Clark, with homes in blue chip suburb Sandy Bay set to cop the largest increase in the state.
The median monthly payment in this suburb is expected to reach $2015, meaning half of mortgage holders will be paying even more than that.
Tasmania’s other electorates with sharp mortgage rises include Franklin (with Tranmere up $62 a month), Bass (Blackstone Heights up $53 a month) and Lyons (Honeywood up $53 a month).
PropTrack economist Paul Ryan said the RBA’s plan in raising the cash rate was to “take money out of people’s pockets” to reduce spending and, therefore, inflation, but this was “incredibly unwelcome” for households.
“People are seeing such high cost of living pressures, groceries have increased really strongly,” Mr Ryan said.
“Most households will have to reassess their budgets so it may be (cutting out) Netflix or going out to dinner and those kinds of luxuries that people enjoy.”
He said the initial rate rise would unlikely put people into mortgage stress, but this may change as rates continued to increase throughout the year.
“Most mortgagors are coming from a time of paying a higher rate so going back to that won’t be too difficult – although they now have those cost-of-living pressures,” Mr Ryan said.
“[Recent] first home buyers tend to be most stretched, but the way people are assessed means they should be able to find the money, just potentially that will have to come out of things they formerly enjoyed.”
He said interest rates from the major banks were preHOMEOWNERS dicted to reach between 3.75 per cent and 4.25 per cent by the end of the year.
The country’s big four banks have all passed through the full 25 basis point (0.25 per cent) increase following Tuesday’s decision, meaning the average variable rate for most borrowers is now 2.75 per cent.
Westpac chief economist Bill Evans is already forecasting a further 40 basis point lift in June.
Labor this week announced one of its central policies – making it easier for 10,000 Australians on low incomes to buy a house by taking an equity stake of up to 40 per cent in their property.
Housing Minister Michael Sukkar on Wednesday slammed Labor’s Help to Buy scheme, saying it should be renamed Forced to Sell.
“We still have no explanation on some of the basic details of this scheme, including how Labor will fund the more than $7bn to pay for their policy, what level of debt they expect taxpayers to take on, and how and when this will be repaid,” Mr Sukkar said.