Homeowners in Australia could face severe financial stress
Industry experts have expressed concern over the financial stress that Australian homeowners will face if interest rates go up by one or two percent.
In the current economic and financial climate in Australia many homeowners are relieved that the base interest rate is currently low, as this reduced the chances of them falling behind on their mortgage repayments and facing losing their homes. However, industry experts have recently expressed concern over what will happen to these homeowners in the event that interest rates rise by one or two percent.
Analysts have said that if the central bank decided to increase the base interest rate by two percent over the next eighteen months then in order to avoid financial problems the average single homeowner in Australia would have to earn an additional seven thousand dollars a year, which is over eleven percent more than the average national wage. In order to keep on top of their mortgage repayments these homeowners would need to be an annual salary of around sixty nine thousand dollars.
One financial expert stated: “If those rates go up by one per cent, clearly you’re starting to get into territory where … people are paying quite a bit more of their income on a mortgage. You’re talking about $1,878 a month more if there is a two per cent rate rise. For a one per cent rise, the average mortgage will start to get close to that danger zone. If you saw rates go up much more than that in the short term, then you’d see some issues.”
Another official said: “An issue would arise if mortgage shot back up again because we have seen, particularly first home buyers, recently taking out ever bigger mortgages. A worry for Australia is we still have high debt levels.”
Source - SMH.com.au