About $29.8bn worth of fixed rate mortgages will expire by the end of the year, which will mean an extra $641 in monthly repayments for homeowners by Christmas, as the Reserve Bank of Australia looks set to deliver even more bad news.
The RBA is tipped to confirm its seventh consecutive rate rise on Tuesday, but Finder’s consumer sentiment tracker in October showed 30 per cent of homeowners were already struggling to pay their home loan each month.
The comparison website has analysed data from the Australian Bureau of Statistics and says many low fixed rates will expire into variable interest rates of more than five per cent over the next 12 months.
On an average loan size of $509,422 that means a $906 increase in monthly repayments by the end of next year.
Finder’s latest RBA cash rate survey has also revealed 38 out of 39 experts and economists believe the rate will change on Tuesday, with 35 of them forecasting another increase of 25 basis points.
That would bring the cash rate to 2.85 per cent in November.
Almost half of the experts agreed with the move, but one in five disagreed with any increase and said the RBA should hold the cash rate.
“The forecasts from the bond-yield curve models I estimated consistently indicate an increase in the value of the cash rate until mid-2023, after which levelling off should follow,” Tomasz Wozniak, from the University of Melbourne, said.
“By that time, the cash rate will nearly surely be higher than 3.6 per cent, will most likely reach four per cent, and is unlikely to exceed 4.4 per cent.
“This would mean that the interest rates might get to the levels from early 2012.”
Finder head of consumer research Graham Cooke said a seventh consecutive rate hike would be a tough burden for many households.
“The current series of rate hikes has added almost $9000 to the annual cost of a $500,000 mortgage,” he said.
“Another 25 basis point hike will push that cost up to near $10,000.
“The RBA has been crystal clear that its top priority is to tamp down inflation. After six hikes, inflation is at a 30-year high. More rate rises are likely on the way.”
Finder research further revealed 70 per cent of homeowners — or 4.1 million households — would not be able to afford their mortgage repayments if there was another rate hike before Christmas.
Nine per cent said they would have to sell their property, while three per cent said they would default on their mortgage.
“The prospect of one more interest rate spike is just too much to manage for millions of households causing many to go to extreme lengths,” Mr Cooke said.
“Remember it’s not too late to find a better home loan deal.
“Refinancing can dramatically lower your costs – mortgage holders could save thousands of dollars a year.”
Story Credit: news.com.au