Homeowners who have been wrestling with their mortgage repayments are about to find things can get a whole lot worse as the Reserve Bank and the financial regulator hand the big banks two more reasons to hike rates.
The worst hit will likely be those who waded into frothy capital-city housing markets at the tail end of the boom. In its latest meeting the RBA warned that as many as eight official rate hikes are on the way as the official cash rate heads for a new normal of 3.5 per cent, while the Australian Prudential Regulation Authority has raised bank equity targets by 150 basis points to 10.5 per cent.
This is happening in an environment where the gap between variable mortgage rates and the official RBA cash rate has doubled in 10 years and is the widest it has been since 1994. Experts say this gap is likely to widen.
In April the RBA warned in its Financial Stability Review that about one third of Australians had built up little or no buffer to higher interest rates or are less than one month ahead on their repayments. Recent UBS research shows 85-90 per cent of mortgages are variable, so this could see millions feel serious debt stress.
i can afford rates much higher than now - bring the rate rises on i say - i certainly wouldn't complain about positive real rates and interest income
what about pensioners who have savings in bank and may want to obtain some interest income?
33.3% households are owner occupier with no mortgage 33.3% households are owner occupier with a mortgage - note: mortgage will range between those recent with maximum debt to those with mature vintages and very little debt 5% households are state (Governmet) owned approx. 28% households are investment properties - note: this will be properties owned outright to properties positively geared to neutral geared and according to most recent ATO about 1.5 million (approx. 18% housing stock) negatively geared again with a range of loan maturity and debt
what is the net distribution of debtors / creditors?
investment properties 18% housing stock negatively geared, but what proportion at how much and what interest rate can they tolerate?
investment properties can increase their tax deduction with increase of interest rates too
what proportion of 33.3% OO with mortgage can tolerate what interest rate
at worst case 33.3% OO with mortgage + 28% investor = 61.3 interest rate sensitive
but what is the actual distribution?
some OO without mortgage may have investment property with mortgage some OO with mortgage may have investment property with mortgage some renter may have investment property with mortgage
there has been a 'we' in the past with mortgages and that did not stop interest rates rising then
Well we's all got our little problems 'n tha one wot ole herbie's hedging agin is that banks just could feel as at least as inclined ta drop interest rates for their depositors as raise 'em for their borrowers - Yunnos, ta maintain their profitability 'n wotnot.
Like sheesh, why would they go too far outa their ways ta raise interest rates on their borrowers wot's their gooses layin' tha golden eggs for 'em when they can hammer us depositors wot they's just pretty much gotta see as liabilities they's gotta pay loot too?
Not one red f***in' cent ... - Wif me even bein' ahead in me tax payments (by my calcs).
'N me family don't owe money neither - Wif our cash in bank bein' enough ta smash any debt we's got 'n still leave hundreds of K left over as 'spare change'.
Definitely NOT sayin' that's tha smartest way ta do things mind! - But don't tells me or mine we owes lots 'n repeatin' ya 'tick tock' verbatim Ta; Coz doin' so's just a crock a shit - For mine.
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