Peter White

As talk of interest rises increases, a national “Australian mortgage and rental affordability survey” has predicted dire consequences for the economy, finding that the majority of Australian borrowers and renters could not meet a mortgage or rent increase equivalent to a rate rise of only one per cent.

The survey was commissioned by Australia’s peak finance and mortgage broker body, the Finance Brokers Association of Australia (FBAA), and conducted by respected research firm McCrindle.

Understandably when asked if rising interest rates would put pressure on their financial position, 66 per cent agreed either strongly, somewhat or slightly.

However when asked more specific questions, the responses stunned the FBAA’s managing director Peter White AM, a 40 plus year industry veteran, who said Australians had possibly grown complacent after almost 11 years without seeing a rate rise.

“Many Australians are clearly on the brink and are sleepwalking into disaster, living in the false hope that rates will stay this low.

“This survey is a wake up call and shows that even a small rise in rates – which is looking more likely next year with rising inflation – could be catastrophic for our nation,” he said.

He was referring not only to the 56 per cent of people who agreed (strongly, somewhat or slightly) that “If interest rates were to rise I would need to look at refinancing my home”, but to the response when people were asked how likely they were to be able to meet a monthly increase in their rent or mortgage of $300.

“Shockingly 57 per cent of people paying a mortgage or rent answered ‘not at all’, and we are talking about an increase equivalent to only one per cent based on the average home loan.

“One per cent is not a large increase. It will happen and with the RBA recently deciding not to intervene to stop increasing yields on three-year government bonds, it will likely happen soon.

“My message to Australians is that we must be better prepared.”

He said borrowers have rightly taken full advantage of historically low rates combined with schemes that allow for low deposits, but issued a chilling warning.

“The housing market has soared and there is a reasonable chance will undergo a correction, meaning that those with low deposits who have stretched themselves to make large repayments could see themselves with negative equity, owing more than the value of the property.

“Add a mortgage increase they can’t pay, and there could be a lot of people in real trouble.”

Mr White pointed out that those who said they couldn’t meet a $300 per month repayment included 46 per cent with a combined gross weekly income between $2000 and $3000, showing that the problem is not limited to very low income earners.

“However there are sections of our community who are more vulnerable and this includes those who rent, remembering that any rate rise a landlord incurs will be passed on to the renter.”

Survey respondents who said they “could not meet at all” a $300 per month rise, include 80 per cent of those in single parent families, 76 per cent with a combined gross weekly income of $700 to $1200, 71 per cent living in remote areas, and 70 per cent of baby boomers.

“Where do these people go if they have to walk away from their home? Public housing, the street?” he asked.

“The options for lower income earners are slim and this will reverberate throughout our society, most likely on the back of the COVID economic struggles.”

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