Housing big spenders fear going bust when interest rates rise

MORE than half of homeowners are concerned about interest rates increasing in the near future, with 15 per cent fearing they will be unable to make their repayments.

And those fears are felt most acutely by households with an annual income below $50,000, with 28 per cent of those homeowners concerned they will not be able to cover the costs of a rate increase.

The findings were revealed by Finder, with the research revealing that the average monthly mortgage repayments in Brisbane represent 42 per cent of the average workers after-tax earnings.

The news is even worse in Sydney and Melbourne, where the average monthly mortgage repayments are worth 76 per cent and 57 per cent of after-tax earnings respectively.

In Canberra and Hobart, it is 49 per cent of after-tax earnings, while the homeowners paying out the least can be found in Perth, where the monthly mortgage repayments represent just 35 per cent of monthly aftertax earnings.

Finder head of consumer research Graham Cooke said some homeowners may have purchased beyond their means during the current property market boom.

“The past 12 months have seen property prices explode as record numbers of Australians have fled into the housing market,” Mr Cooke said.

“Low interest rates have encouraged many buyers to purchase earlier than they otherwise might have for fear of missing out.

“But not all of them will have budgeted for their monthly repayments to go up if or before the cash rate increases.”

Suburb records are also continuing to tumble across many southeast Queensland suburbs, as buyers compete against limited listings.

And the price rises are likely to continue into next year, according to Finder, with the comparison website, and its 40 experts and economists, tipping values in Brisbane to rise by another eight per cent, or $47,342, to $633,484.

Mr Cooke said the lockdowns in NSW and Victoria had done little to dampen the property frenzy.

However, Mr Cooke said Australia was almost certainly heading for another recession.

“How deep it will cut, and how quickly we will recover, will depend heavily on when the current lockdowns end and how quickly interstate and international travel are restored,” he said.

“Unfortunately, that trifecta of freedom will almost certainly not come until next year.”

The RBA held the cash rate at 0.1 per cent recently. In a statement, RBA governor Philip Lowe said that prior to the Delta outbreak, the Australian economy had considerable momentum.

“The recovery in the Australian economy has, however, been interrupted by the Delta outbreak and the associated restrictions on activity,” he said.

“GDP is expected to decline materially in the September quarter and the unemployment rate will move higher over coming months.

“While the outbreak is affecting most parts of the economy, the impact is uneven, with some areas facing very difficult conditions while others are continuing to grow strongly.”

But he added that the setback to the economy was expected to be temporary.

“The Delta outbreak is expected to delay, but not derail, the recovery,” Mr Lowe said.

“As vaccination rates increase further and restrictions are eased, the economy should bounce back.

“There is, however, uncertainty about the timing and pace of this bounce-back and it is likely to be slower than that earlier in the year.”

Mr Lowe said that house prices were continuing to rise, although turnover in some markets has declined following the virus outbreak.

“Housing credit growth has picked up due to stronger demand for credit by both owner-occupiers and investors,” the governor said.

“Given the environment of rising housing prices and low interest rates, the Bank is monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”