First home buyers 'are particularly sensitive to rising rates'
First home buyers are particularly vulnerable to mortgage stress because of rising interest rates and bigger loans, an expert has suggested.
JPMorgan analyst Scott Manning told the Age that if home loan rates keep rising to levels seen before the financial crisis, first home buyers will be forced to spend about half of their post-tax income on servicing interest.
’’The higher gearing tolerance of first owners results in greater sensitivity to rising interest rates,’’ he said.
His comments come after research by JPMorgan and Fujitsu Consulting revealed that first home owners are now borrowing an average of about $280,000 on a home loan.
It was also observed that, in addition to higher repayment costs, potential first home buyers face a growing struggle to secure a home loan in the first place given that some of the big financial bodies like Commonwealth Bank and Westpac are expected to slow the pace of their lending growth this year. This could encourage more Australians to compare home loans in search of better options.
This week, Lesley Parker, a columnist for the Sydney Morning Herald, suggested that Australia’s major banks are looking to "ration" their mortgage money and are instead focusing on business lending.
This article is brought to you by Mozo – Helping you compare home loans