Gold Coast mortgage stress: What Reserve Bank’s interest rate decision means for struggling households

The Gold Coast’s economy won’t bounce back from rampant inflation for at least two years, as the financial pinch on some of the city’s most elite suburbs continues.

Interest rates have gone up in a shock move by the Reserve Bank as leading real estate figures warn there is more pain to come for the Gold Coast’s property market.

The board of the Reserve Bank (RBA) on Tuesday to raised the cash rate by 25 basis points, taking interest rates to 3.85 per cent.

The move defied expectations following the cash rate freeze in April ending a run of 10 consecutive rises by the RBA which has put extreme pressure on more than 27,000 Gold Coast households which are facing severe mortgage stress.

Inflation remains at 6.6 per cent.

Households with a $750,000 mortgage are paying around $1474 more than they were in May 2022.

Reserve Bank of Australia Governor Philip Lowe. Picture: NCA NewsWire / Nikki Short

Reserve Bank Governor Philip Lowe said inflation had passed its peak but warned it was still too high.

“The Board held interest rates steady last month to provide additional time to assess the state of the economy and the outlook,” he said.

“While the recent data showed a welcome decline in inflation, the central forecast remains that it takes a couple of years before inflation returns to the top of the target range.

“The Board is still seeking to keep the economy on an even keel as inflation returns to the 2–3 per cent target range, but the path to achieving a soft landing remains a narrow one.

“The central forecast is for the economy to continue growing, albeit at a below-trend pace.”

May marks a year since the RBA began increasing the cash rate in a bid to clamp down on rampant inflation, initiating a tough year for households which have also been hit by significant cost of living issues.

It comes before monthly mortgage repayments are expected to skyrocket mid-year for thousands of homeowners who took out mortgages at fixed rates in the past two years while the cash rate sat at record lows, with the fixed period coming to an end.

Ray White Surfers Paradise Group chairman Andrew Bell. Picture: Celeste Humphrey/novasoma photography

Ray White Surfers Paradise chairman Andrew Bell said there was “significant pain” in the market but did not expect it to have a major impact on the city’s property sector.

“There was every reason not to increase the cash rate because the major impact is on the ability for people to borrow for the homey they want but I don’t think it will be a big issue for those buying right now because I think they will be borrowing within their means,” he said.

“There is no question there is hurt out there because people are not spending as much, not going out as many restaurants, holding back and trying to ride out this high interest rate period.

Ephraim Island and Paradise Point . Picture Mike Batterham

“Some people’s interest rates are up $1500 to $2000 a month and I honestly wonder where you find that kind of money.”

Data compiled by Melbourne-based firm Digital Finance Analytics (DFA) in March revealed the number of Gold Coast households facing mortgage stress had increased from 19,881 in February 2022 to 27,777.

It had jumped from 25,404 since January.

The postcodes with the highest proportion of struggling homeowners are 4216 and 4209, home to the expensive waterfront mega mansions of Sovereign Islands, Paradise Point and Runaway Bay, the rapidly growing suburbs of Coomera, Pimpama, Upper Coomera respectively.

Real Estate Institute of Queensland Gold Coast chairman Andrew Henderson said a hold on interest rates would have benefited the market in the long-run.

“The lack of increase in April has brought confidence back to the market for new buyers coming in, though the key issue for the market remains supply (of housing),” he said.

“People are going to be feeling the pain still but I don’t think they are in a position right how which would be the tipping point of them losing their houses.”

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Originally published as Gold Coast mortgage stress: What Reserve Bank’s interest rate decision means for struggling households