© Reuters. FILE PHOTO: A row of newly built apartment buildings in the suburbs of Epping, Sydney, Australia February 1, 2019. REUTERS/Tom Westbrook
SYDNEY (Reuters) – The post-pandemic slump for Australian homes will worsen next year as hundreds of billions of dollars worth of mortgage debt is fixed at record low interest rates in 2020 and 2021 is due, forcing borrowers to refinance at sky-high interest rates.
Here are some statistics on Australia’s indebted households, the strength of which will be important to the Reserve Bank of Australia’s central scenario that the economy lands slightly in next year.
OF THE MOST WORLDWIDE PERSONS
Australian households are the second most indebted in the world, with total debt accounting for 119% of gross domestic product (GDP) last year, second only to Switzerland, data from the International Monetary Fund shows.
Relative to income, household debt has grown significantly over the past decades to 211% of net disposable income by 2021, the fifth highest in the world, according to the OECD. That compares with a rate of 96.5% in 1995, when the OECD data began.
Affordability is the worst on record. The national median home value was estimated at 8.5 times the median annual household income in the first quarter of this year, a record high, according to ANZ and CoreLogic.
COVID BY EXPLOSION
After recording an initial drop at the start of the COVID-19 pandemic, Australia’s home values rose 24.6% from late March 2020 to February 2022, as hundreds of thousands of Australians took advantage extremely low prices to enter one of the largest markets in the world. The most affordable real estate market.
They now face a 5-6% rate hike when their fixed-rate loans expire next year, up from the current 2-3%. More than 40% of borrowers took out fixed-rate loans at the peak of the market last year, compared with 15% before COVID.
RateCity, a mortgage comparison website, estimates Australia’s four major banks – CBA, NAB, Westpac and ANZ – have a combined total of more than $270 billion in fixed-rate loans that expire next year. , with a peak in the number of people paying a fixed rate around midway through. next year.
One-third of fixed-rate loans will expire in 2024 and beyond.
In its financial stability review released in October, the RBA expected nearly 60 percent of borrowers with fixed-rate loans to face a minimum payment increase of at least 40 percent. %.
According to the RBA, borrowers with fixed-rate loans that expire at the end of 2023 will see an average increase of about $650, or about 45%, in their monthly repayments.
This is based on the assumption that rates will increase cumulatively by 350 basis points to 3.6% by the end of 2023, largely in line with current market expectations.
With the rate hike implemented, RateCity estimates for a homeowner on a home loan of AU$500,000, AU$750,000, AU$900,000 and AU$1,100,000, their repayments are now AU$834, AU$1,251, AU$1,501 and AU$1,834 compared to before the first interest rate hike.