Mortgage stress is rising to alarming levels, with seven Sydney suburbs worst hit by rising interest rates.
A growing number of Australian homeowners are facing mortgage stress, with residents of seven Sydney suburbs in particular feeling the pinch of rising costs of living and interest rates.
There are fears that an impending Reserve Bank interest rate hike on Tuesday could force even more Australians into mortgage stress, which is typically defined by mortgage repayments exceeding 30% of household income.
As homeowners wait to see if tomorrow’s announcement will affect them, newly released 2021 census data showed thousands of Sydney residents are already suffering from mortgage stress.
The data showed that 61.1% of homes in Greater Sydney were owned or mortgaged, while 35.9% of people rented.
In Sydney, 19.8%, or 120,485 people, were facing mortgage repayments exceeding 30% of their household income.
Census data also revealed that 35.3% – nearly 232,000 people across the city – had rents representing more than 30% of their income.
There were also seven Sydney LGAs which were found to be disproportionately affected by mortgage and tenancy stress.
A whopping 25.9% of Burwood residents had mortgage payments above 30% of their household income, with that number rising to 38.5% for renters.
Other areas where residents reported having difficulty with mortgages included Canterbury-Bankstown (25.6% homeowners, 42.8% renters), Fairfield (25.4% homeowners, 48.5% renters), Strathfield (25% of owners, 31.3% of renters), Cumberland (24.7% of owners, 36.4% of renters), Parramatta (24.3% of owners, 34.1% of renters) and Georges River (23.9% of owners, 33.9% of renters). tenants).
Across South West Sydney, 16.2% of households had an income of less than $650 a week.
Of the residents of this area, 23.6% – 11,750 people – had mortgage repayments above 30% of their household income.
For tenants, 43.7% – 21,723 people – had rents above 30% of their income.
Reserve Bank decision imminent
The RBA is due to meet on Tuesday with economists expecting the interest rate to be raised for the third consecutive time.
“(The RBA) has indicated that an increase of 0.25 or 0.5 is on the table – we think they will probably go with the 0.5 which will take the cash rate from 0.85 to 1, 35,” said Dr Shane Oliver, chief economist at AMP. .
“The logic is simply that the economy is currently quite strong with unemployment falling and an inflation rate at 5% and still rising.”
Dr Oliver said the interest rate is expected to continue to rise for the rest of this year, but the rate of increase is likely to be ‘slower’ as the RBA seeks to balance rising cost of living pressures .
“So while we will see a 0.5% rise in July, the interest rate and the inflation rate will slow down so that by the end of this year, we will only see a rise in the rate cash flow of 2.1% and eventually peaking at 2.5% by the end of the first half of next year,” he said.
“What the RBA is trying to do now is they are trying to signal that they really want to bring inflation down and start cooling the demands of the economy.”
RBA Governor Philip Lowe sought to reassure Australians last week by saying a 0.75 percentage point interest rate hike was “not on the table” this time around.
In fact, he said the central bank was not looking to impose 0.75% increases and that in July it would likely consider “graduated steps.”
In early May, the RBA raised Australia’s official exchange rate by 25 basis points to 0.35% from 0.1% – a more drastic hike than the 15 basis point hike most pundits had predicted.
Then, in June, the board took another shock decision, raising the official exchange rate by 50 basis points to 0.85% and catching pundits off guard with the so-called “oversized” rate hike. .
Dr Lowe’s comments appear to have poured cold water on suggestions that the official exchange rate would hit 4% in 2022, as to do so the RBA would need to announce at least a 0.75% hike.