SYDNEY, Dec 20 (Reuters) – The post-pandemic slump in Australian housing is set to deepen next year as hundreds of billions of dollars of mortgage debt is set to mature at record low rates in 2020 and 2021, forcing of borrowers to refinance at very high interest rates. rates.
Repayments on an estimated A$370 billion ($245.79 billion) in home loans could rise by up to two-thirds at a time when real incomes are already shrinking due to rising inflation, facing an explosion of body of house prices and the main engine of economic growth – consumer spending.
Sydney house values have fallen 12% so far this year and Eliza Owen, head of Australian research at property consultancy CoreLogic, expects further losses as more distressed properties are listed for sale. .
“While most borrowers are expected to be able to continue servicing their mortgages, there could be more aggressive sales, if mortgage arrears rise from record lows,” Owen said.
Homeowner Francesca Lemon knows the pain – payments on her variable-rate mortgage have soared to A$1,200 per month this year, forcing her to return to work despite a long-term condition of medical so that his family can continue the loan.
“It’s very frustrating and people are already struggling to survive. The cost of paying off your mortgage is literally going up for everyone by thousands of dollars,” said 31-year-old Lemon.
Australia’s big four banks – Commonwealth Bank of Australia (CBA.AX), Westpac (WBC.AX), National Australia Bank (NAB.AX) and ANZ (ANZ.AX) – account for 75% of mortgages country market.
The Reserve Bank of Australia (RBA) has raised interest rates every month since May, taking them from an all-time low of 0.1% to a decade peak of 3.1%.
Policymakers are well aware that mortgage payments will surge to record highs next year when fixed-rate loans expire, and have cited this as a reason for becoming the first major central bank to slow down flow of restriction. read more
The RBA fears that 15% of borrowers on variable rates could see their cash flows turn negative, assuming interest rates rise to 3.6% in line with market expectations.
‘HARD BLOOD’
Lemon was able to get a lower rate from another lender last month, helped by a surge in competition for refinancing needs. However, those who buy at the top of the market may end up in negative equity and have no choice but to sell.
Buyers’ agent Lloyd Edge says some cautious mortgage holders are selling before their fixed loans expire.
“I think there are a lot of other people where this is the case, but they just don’t know it yet.”
Hundreds of thousands of Australians are taking advantage of rock-bottom rates during the COVID pandemic to get into one of the world’s least affordable housing markets.
Fixed-rate loans – typically with two or three-year maturities – accounted for more than 40% of new loans during the COVID era, up from 15% before.
The rate hikes already in place would add nearly A$1,000 a month to the average A$600,000 loan, a deadweight for a population with A$2 trillion ($1.3 trillion) in debt. at home.
There has been no material increase in loan arrears thanks to savings buffers built up through the COVID pandemic, strict stress tests on loan applications, and the usual delay of two to three months for rate hikes to filter through the economy.
However, surveys show signs of borrower stress with consumer confidence at a low usually seen only in recessions. Research firm Roy Morgan expects one in four mortgage holders to be at financial risk in January.
Leesa Gasparin, a 55-year-old resident of Tasmania, now contributes a quarter of her income of about $4,000 a month to her rising debt.
“I know it might not be a lot of money to some people, but it is to me. It’s like everything with groceries, power and so on.
($1 = 1.5053 Australian dollars)
Reporting by Stella Qiu and Wayne Cole and Editing by Muralikumar Anantharaman
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