The RBA cash rate that would plunge the ‘majority’ into mortgage stress

More than half of all households will experience “significant mortgage stress” if the Reserve Bank the cash rate hits 3 percent, as expected, according to new research.
Nearly one in five borrowers is already feeling the pinch of major mortgage stress, a survey of home loan provider Aussie found, after four straight hikes in RBA rates.

Westpac and ANZ economists predict the policy rate will peak at 3.35 percent, up from 1.85 percent today.

Nearly one in five borrowers are already feeling the pinch of significant mortgage stress, a survey by home loan provider Aussie found, after four straight RBA rate hikes. (APA)
If that happens, it would mean Interest rates it will almost double from where they are now.

The research revealed that a significant number of Australian mortgage holders are primed for mortgage anxiety.

Nearly three in 10 borrowers surveyed said they didn’t consider the cash rate to increase at all when budgeting for a home loan, despite having to account for it in their home loan appraisals.

And four in ten only budgeted for the impact of a cash rate of 3 percent or less.

While economists at Westpac and ANZ forecast the cash rate to move above 3 percent, analysts at Commonwealth Bank and NAB share a more optimistic outlook, anticipating a level between 2.5 and 3 percent.

“The real specter of mortgage stress is when people start losing their jobs,” property economist Dr Andrew Wilson told

“That’s what we have to watch out for.

“But… we don’t really have that chance for the foreseeable future.”

Australia unemployment rate of 3.4 percent is at its lowest level in nearly half a century.

“It’s been a year of correction in our capital city’s housing market,” Wilson said, but added that the turmoil was “not a surprise” after years of booming home prices.

Housing in an Australian neighborhood
The Reserve Bank used market forecasts of a 3 percent cash rate to support its latest economic forecasts. (Peter Ray)

While some were forecasting house prices in Sydney and Melbourne to fall as much as 15 per cent, Wilson said he was not convinced.

“There are a number of factors that may mean this phase of correction will be shallower than many expect,” he said.

The market in Australia’s two most populous cities could bottom out by the end of the year, he said.

“There is no doubt that this is the hangover after the party.”

The real problem now, he said, was trust.

“In general, we are a short supply market in all of our capital cities.

“There aren’t enough houses to meet the demand, and all you have to do is look at the rental market to see that.”

Researchers have reimagined 10 car-centric Australian streets to illustrate the benefits of reallocating space to people.

What 10 Busy Australian Streets Would Look Like If We Removed The Cars

The first rate hikes in years, and the prospect of more, have sidelined buyers and sellers, he said.

“They’re waiting to see how it all pans out.”

The next RBA decision is scheduled for September 6.

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