Interest rate rises: mortgages still feeling the Reserve Bank hits

The Reserve Bank has not lifted interest rates since June but households are still hurting as many delay big life decisions.

Reserve Bank interest rate rises may be over for now, but the mortgage pain is still intensifying for households.

Separate new research by the Mortgage and Finance Association of Australia and Mortgage Choice highlights the impact of the dozen rate rises since mid-2022.

Four out of five people are postponing big life decisions including large purchases, investments and having children, a rising number of borrowers are unable to refinance, and many people are seeking help for the first time as they struggle to meet mortgage repayments.

The last RBA rate rise was on June 7 and is still flowing through the system, while nearly 900,000 borrowers are experiencing a mortgage cliff as their low fixed rates revert to prevailing variable rates.

MFAA chief executive officer Anja Pannek.

The 2023 MFAA member sentiment survey of mortgage brokers found mortgage concerns outranked the rising cost of living, with 95 per cent of refinancing problems related to home loan serviceability rather than higher living expenses.

“What we’re seeing is a cost-of-housing crisis, not a cost-of-living crisis,” said MFAA chief executive officer Anja Pannek.

“Anyone feeling the cost-of-living crunch can opt for more affordable options or cutting back on discretionary expenditure, but paying off your home loan is non-negotiable,” she said.

“Interest rate rises may have paused for now, but many mortgage holders continue to roll off very low fixed rate loans into much higher variable rates.

“With half of all fixed rate mortgages expiring this year – an estimated 880,000 loans – many borrowers have either recently gone over the fixed rate cliff, or will be doing so.”

Ms Pannek said mortgage brokers reported that the fixed rate cliff was a key driver of financial stress, and 95 per cent of brokers said clients had come to them for the first time for help navigating their home loan.

Meanwhile, Mortgage Choice research has found more than three quarters of mortgage holders and prospective buyers had postponed a big life decision because of the current climate.

Big-ticket purchases, savings, investments, and retirement plans are among the key things postponed, while 11 per cent of prospective property buyers had delayed starting a family, it found.

Mortgage Choice CEO Anthony Waldron said the findings were worrying “but unfortunately not surprising”.

“Every day our brokers are meeting with worried borrowers – in particular those facing the end of their fixed-term rates and potential increases of more than $1000 per month on their repayments,” he said.

Mortgage Choice chief executive Anthony Waldron.

“We know that Australians’ borrowing power has reduced by as much as 30 per cent since the RBA first started raising the cash rate in May 2022.

The MFAA’s Ms Pannek said borrowers could try to cope with the current situation by:

• Asking themselves what they could to do prepare for higher repayments.

• Talking with their lender’s hardship team, being sure to ask for help as soon as possible if their household finances were struggling.

• Consider budgeting, debt restructuring or extending the loan’s term.

• Speak with a mortgage broker to discuss options.

These could include “negotiating a discount with your lender, help with refinancing your home loan, consider consolidating or reducing other debt or to help you with your budget”, she said.

Originally published as Interest rate rises: mortgages still feeling the Reserve Bank hits