Mortgages are almost maxed out: Aussies unable to afford rate hikes
73% of mortgage holders won’t be able to afford back-to-back rate increase if they continue past May
13 March 2023
- One-in-five borrowers can already not afford any rate increases this year
- A further 16% will struggle if rates rise again in March by 25 basis points
- Cash rate expected to increase by 25 basis points to 3.60% next Tuesday
- ANZ, NAB and Westpac predict the cash rate will increase to 4.10% by May or June
- The average variable interest rate is 5.85% and the lowest variable rate in the Mozo database is 4.48%
- 25 basis point rate increase in March will add $92 to monthly repayments on a $600,000 mortgage, which is a total increase of $14,172 since rate increases started
It seems like the majority of homeowners are destined for struggle street if the RBA continues to raise interest rates for a number of months. New research from Mozo shows that 73% of mortgagees will not be able to afford repeated rate increases if they continue past May this year.
The findings come as ANZ, NAB and Westpac all predict the cash rate has not peaked and will continue to increase to 4.10%. This could see rates rise continuously until May or June.
“Despite countless explanations from the RBA of why rates are continuing to rise, it doesn’t make it any easier on household budgets. The compounding effect of these rate increases has seen mortgages increase by thousands of dollars a year,” says Claire Frawley, Personal Finance Expert at Mozo.
Mortgage holders were surveyed at the start of 2023 and one-in-five (20%) borrowers admitted they could not afford any rate increase this year. A further 16% said their budgets could only hold-out until March.
If the RBA increases the cash rate in March by 25 basis points, that would add $92 to monthly repayments on a $600,000 mortgage. This would see a total increase of $14,172 for this borrower after the ten rate increases, totaling 350 basis points.
“It’s really shocking to think how many households will be struggling if there are more rate rises. Everyone has already been making big sacrifices when it comes to finding extra cash, now they will need to decide what's next on the chopping block .”
Notes: Rates are correct as at 1 March 2023. Mozo commissioned a nationally representative survey of 1012 Australians conducted by Researchify in January-February 2023.