“Big Problem”: Fixed-rate mortgage cliff looms large

31st Mar, 2023 | Articles, In The News, Interest Rates

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Over 1.2 million Australian homeowners are expected to be making mortgage repayments three times their current level.
mark bouris talks about RBA and interest rates

Over 1.2 million Australian homeowners are expected to be making mortgage repayments three times their current level, as many borrowers will have their near-2% fixed rate period end, and will likely have their interest rate revert to 6% in the coming months.

Westpac CEO, Peter King has also raised alarm bells this week, stating that the level of “repossessed homes [were] near GFC levels”.*

Mark Bouris told Sky News that YBR Home Loans is not seeing high levels of mortgage defaults as yet, however, he stated that this is what the Reserve Bank (RBA) is essentially trying to achieve. 

Bouris said he is “not surprised” by the news coming out of Westpac, “because the general position of these interest rate hikes by reserve banks around the world, is they keep doing it until they break something. Back in the GFC, they broke the banking system in the United States. This time, we’re not going to break the banking system, because the government’s not gonna let that happen.”

“What they really want to break this time is consumers,” Bouris told Sky News AUstralia, “and one of the consequences of breaking consumers is that people have to sell their houses or the banks take possession.”.

Mr King stressed that the number of families falling behind on mortgage repayments remained low, however, as Mark warned on Sky news, many lenders are expecting this to change as borrowers come off their lower fixed rate. 

“Everybody talks about the 800,000 people this year whose fixed rates are going to go to variable rate sometime this year. And that starts happening this month,” said Bouris.

“But there are also another 450,000 people who are going to come off their fixed rate mortgages in 2024, as well. So we’ve got about 18 months, and around 1.2 million borrowers are going to go from paying 2% per annum to nearly 6%. So that’s three times and you’re going to be paying a lot more per month. So that’s a big, big, big problem.”

With the cost of living drastically increasing over recent months, Bouris spoke of his concern for many of these borrowers who are already struggling with their monthly budgets: “Where are those people going to find an extra couple thousand bucks a month?” 

“On an average mortgage, they’re going to be paying at least $1,000 to $1,500 a month more when their interest rate reverts. Where are they going to find that? That’s $12,00 to $13,000 more a year, in after tax dollars? Did they get that pay rise? Or do they get a $20,000 pay rise during the year? Probably unlikely.”

Mark was further asked about the recent reports of an influx in migration and what impact this will have on property prices in the coming months and years. Tune in to Mark’s insight and analysis by clicking the video above.

* As Reported by the Australian.

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