Interest rate hike: Qld areas where mortgages will break the bank

Half of all households with a mortgage will be unable to make ends meet by Christmas as a run of interest rate rises plunges an extra 500,000 households into the red. Here are the parts of Queensland where it will hurt most.

Half of all households with a mortgage will be unable to make ends meet by Christmas as a run of interest rate rises plunges an extra 500,000 households into the red.

The Reserve Bank of Australia on Tuesday lifted its benchmark cash rate by 0.5 per cent after a The half a percentage point increase has brought the cash rate to 0.85 per cent and added $140 a month to repayments on the average new Queensland 25-year mortgage of $527,452, according to comparison site Rate City.

Tuesday’s hike is unlikely to be the last this year.

Analysts at Macquarie Bank, AMP and Goldman Sachs are among those predicting a 2 per cent cash rate by Christmas.

The RBA has not applied an increase larger than 25bp since February 2000, but Nomura senior economist Andrew Ticehurst said there were signs the economy was “overheating”.

Leading industry observer, Digital Finance Analytics principal Martin North, said a 2 per cent cash rate would increase the share of households in mortgage stress from about 44 per cent to almost 50 per cent.

Digital Finance Analytics principal Martin North. Picture: Hollie Adams/The Australian

“We’ve got more than four million households out of nearly 10 million who are already close to the edge – that’s an unprecedented situation.

“If we assume the RBA adds 2 per cent, or just about that, another 400,000 to 500,000 would probably fall into that stress category,” Mr North said.

“We’d be knocking on close to half of all households with a mortgage being in stress”, he added.

According to DFA, households are in stress if they are spending more on necessities and loan repayments than they are earning from work, welfare and investments.

Mr North’s data shows Toowoomba has more mortgagors already going backwards than anywhere else in Queensland, with the postcode alarmingly in the top five in the country.

Nearly 9500 households in that area are in stress, which is 60 per cent of households.

Meanwhile, suburbs surrounding the Camp Hill and Geebung postcodes have 6328 and 6084 in stress respectively – 83 and 85 per cent of households.

DFA’s Mr North said the moneysmart.gov.au website had excellent tools for helping households work out where their money is going.“Some people are going to have to decide whether their mobile phone subscription is more important than paying the mortgage,” he said.

Originally published as Interest rate hike: Qld areas where mortgages will break the bank