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Homeowners face 50 per cent rise in mortgage repayment costs

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Mortgage repayment costs have surged the highest in Sydney, and expected to hit an extra $1,800 come May 2. Picture: NCA NewsWire / David Swift

Borrowers who bought homes at the peak of the market are facing a 50 per cent rise in mortgage repayments in just a year, with the worst hit paying over $1,800 a month extra.

Exclusive calculations by RateCity found homeowners across all major capitals were seeing as much as a 50 per cent rise in their mortgage repayment costs, after the Reserve Bank board approved its ninth rise Tuesday to 3.35 per cent, and was expected to go to 3.85 per cent by May 2.

RateCity research director Sally Tindall said “anyone that bought at the peak of those markets, who overstretched the budget and borrowed every single dollar they possibly could from the bank, is likely to be feeling the heat”.

“These are really super-sized increases for what is typically a family’s biggest monthly expense,” she said.

All capitals are facing a massive rise in mortgage repayment costs after the surge in prices two years ago. Picture: AAP Image/Dave Hunt.

“The total increase in repayments from April to February (including Tuesday’s 0.25pp hike) is 45 per cent, and if the cash rate gets to 3.85 per cent as forecasted by Westpac, that will equate to a 52 per cent increase in repayments since before the hikes began,” she said.

Ms Tindal said Sydney figures showed borrowers were already footing an extra $1,584 in repayments a month after Tuesday’s rise, which was expected to rise to $1,800 by May 2.

“It’s startling,” Ms Tindall said.

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SMARTdaily cover photo: RateCity's Sally Tindall

RateCity Research Director Sally Tindall. Picture: Tim Hunter.

Those who may have overstretched to get into the Melbourne market two years ago were facing an extra $1,232 in mortgage repayments now – a rise of just under 40 per cent – for “what is typically their biggest monthly expense”. The extra payments were expected to hit $1,438 come May 2m while Canberra borrowers were on a similar tangent, facing $1,171 extra since Tuesday, rising to $1,367 by May.

Brisbane buyers who took on the peak were expected to foot an extra $1,057 a month by May 2, with Tuesday’s rate hike had already pushing it to $906 extra.

“A thousand dollars is a huge amount of extra money that someone has to find in their monthly budget … That’s no mean feat when the prices at the supermarket, petrol station and everywhere else are going up at the same time.”

Aerial images over Melbourne CBD

Melbourne borrowers who bought two years ago with 20pc deposit are looking at $1,367 extra in mortgage repayments costs if the cash rate goes to 3.85pc. Picture: David Caird

Adelaide, Hobart, Darwin and Perth were all looking at extra repayments below the $1,000 level, the data found. Ms Tindall said “while a lot of borrowers will be feeling the heat, certainly those increases aren’t as startling as places like Sydney and Melbourne.”

After nine rate hikes, an Adelaide borrower was looking at $744 extra in mortgage repayments a month, rising to $869 come May, with similar levels in Hobart ($902 now, $1,053 by May), Darwin ($746 and $871) and Perth ($740 and $863).

Adelaide’s extra mortgage repayment level is under $1,000 but still “not an easy bar to clear”.

“It’s still not an easy bar to clear but perhaps there’s some cold comfort in knowing that in property hot spots elsewhere in the country, borrowers who bought at the peak of those hot spots are paying significantly more on their monthly mortgage repayments.”

PRD chief economist Dr Diaswati Mardiasmo said much depended on how well household budgets were coping with inflation.

“Many households would start experiencing the bite already,” she said. “The RBA’s policy rate expectations as of November 2022 indicated a peak of just over 4 per cent in 2023. If we go above this, then it would really start to bite (even more so) for households.”

PRD Chief Economist Dr Diaswati Mardiasmo.

Dr Mardiasmo said absorbing the extra costs was “painful” but “doable” for the majority of Australian mortgage holders.

“The latest household savings data reads at just under 10 per cent, after hitting a peak of over 20 per cent during COVID-19, and our baseline pre-Covid-19 savings rate is around 5 per cent.”

As well, she said, mortgage offset account balances were the highest they’d ever been “thanks to the ultra-low cash rate previously which has created a buffer”.

Ms Tindall said borrowers should not be swayed by predictions of rate cuts come late 2023 or early 2024, but should prepare “on the off chance” Deutsche Bank’s 4.1 per cent prediction came true. “You can’t take anything as a given,” she said.


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