Yahoo Finance RBA’s dire mortgage warning as 1 in 5 face fixed-rate cliff
RBA governor Philip Lowe warned mortgage payments could reach a record high by next year.
The mortgage pain being felt by millions of Aussies is not over yet, with the Reserve Bank (RBA) governor warning payments could reach a record high next year.
This comes as one in five mortgage holders are about to fall off their fixed rate over the next couple of months, with their new repayments likely to skyrocket.
New data from Aussie Home Loans revealed more than half (50.22 per cent) of fixed rates would expire in September this year, when they would see the full impact of the past 10 rate increases.
Also read: Revealed: The best mortgage deals available right now
Also read: Interest rates: How to save $12k by refinancing your mortgage
Also read: 430,000 mortgage holders admit to missing a payment: ‘Things could get worse’
RBA governor Philip Lowe acknowledged the problem when he spoke at the National Press Club on Wednesday - the day after the central bank decided to keep interest rates on hold for April.
“The 35 per cent of households with a mortgage are experiencing, or will experience, a significant increase in their required payments,” Lowe said.
“This increase in mortgage rates has had a significant effect on household budgets and we anticipate that required mortgage payments will reach a new record high of almost 10 per cent of household disposable income by the end of next year.”
What to do if your fixed rate is coming to an end
Aussie Home Loans has urged homeowners to consider refinancing. Mortgage brokers have, on average, been able to help households with a 0.68 per cent reduction over the past quarter.
The current average home loan interest rate is 5.82 per cent. On a mortgage of $500,000, the difference could equate to a monthly saving of $202, a yearly saving of $2,354 and a life-of-loan difference of $60,851.
”Just as households review their daily budgets [and] utilities in order to save on their family’s bottom line, refinancing is just as - if not more - important to regularly revisit,” Aussie Home Loans chief distribution officer Brad Cramb said.
“Your home loan interest rate should never be a set-and-forget option. It can be one of the most effective tools for homeowners to help reduce their financial burden and achieve greater financial stability.”
Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to our free daily newsletter.
