How high could loan payments rise in Hobart?

Monthly repayments on a typical house could be $1000s more than the last time the cash rate was what it’s expected to reach later this year. SEARCH YOUR SUBURB>>

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HOBART homeowners could be feeling the pinch ahead of the summer spending season with home loans forecast to cost hundreds more by Christmas.

These budget-biting repayment increases would come if interest rates rose to the 1.75 per cent level forecast by some banks, according to analysis from PropTrack.

A 1.75 per cent loan rate would match what buyers paid in July 2016 when Malcolm Turnbull was Prime Minister.

Since then, Hobart home prices have doubled from a median of $360,000 in July 2016 to $720,000 in the year ending April 2022.

Meanwhile, everyone has been saddled with higher living costs combined with flat wage growth in Tasmania.

The latest average weekly earnings data from the ABS showed Tasmanians still earn less than any other state in Australia at $1541 gross. That figure that is over $200 per week less than the national average.

Money expert at Finder Rebecca Pike said with the cash rate expected to increase alongside cost of living increases, people may feel like they’re being “hit from all angles”.

“It might sound obvious, but shopping around for a better deal on some of your regular expenses is a good place to start and can save you hundreds if not thousands of dollars,” she said.

Finder money specialist Rebecca Pike.

Finder research shows that the price of petrol has risen by 64.1 per cent between 2016 and 2022.

Childcare is 18.5 per cent more expensive alongside, beer at 15.8 per cent, milk 15.4 per cent, bread 9.5 per cent, restaurant meals 12.7 per cent and wine is just 2 per cent higher.

These increases are larger than overall inflation (14.5 per cent) or wage inflation (12.4 per cent) over the same period.

Finder found that the bills causing Aussies the most stress in 2022 were rent/mortgage repayments (35 per cent), groceries (30 per cent), and petrol (25 per cent).

PropTrack data shows that house values in South Hobart have grown from $420,000 in 2016 to $1.16m this year. This city fringe suburb has Hobart’s largest forecast increase in loan payments between 2016 and 2022.

In 2016, a typical homebuyer needed $1930 per month to service a South Hobart mortgage but today’s buyer needs $3720 to pay the bank, a figure that could reach $4630 at Christmastime should rates increase by 1.75 per cent.

In nearby Sandy Bay, mortgage payments for a house grew from $3220 per month to $4750 and could reach $5900.

In Taroona, homeowners could be facing a $4270 per month bill at year-end compared to $2380 in 2016.

In Bellerive, house loans are set to jump from $2050 up to $3860 while New Town buyers are looking at a difference of $1790 per month comparing 2016 with the year-end forecast.

PropTrack economist Angus Moore said rising interest rates and repayments will force some Tasmanians — particularly those that took out large mortgages — to adjust their budgets.

Wages won’t be able to keep pace with inflation and rises in the cost of living in the short-term. A lot of households will find it tough, he said.

PropTrack economist Angus Moore.

However, banks assess your ability to pay a mortgage at a rate above the rate you actually get, Mr Moore said.

“Unless their circumstance has changed, most households should be able continue servicing their mortgage, even with higher interest rates,” he said.

Propertyology director Simon Pressley believes the commentary around the RBA and interest rate rises is more about sentiment than market fundamentals.

“Knock me over with a feather if there is going to be a tsunami of mortgage stress, distressed sales … there’s no way in the world,” he said.

No.7 Dresden St, Sandy Bay is on the market at $2.45m-plus. (Peterswald for property)

No.32 Romilly Street townhouses in South Hobart start from $895,000 (Petrusma Property)

“Rates will rise but they are still extremely low. We are talking about increasing from a record low by a very small amount.

“They could go up five times and still be at a level that they were three years ago.

“The sooner that people see that increases have not led to the world falling apart, the better it will be for sentiment. Then we can just get on with it.”

PropTrack’s research analysed mortgage payments based on the average new mortgage over the past year. The data assumes a 80 per cent loan-to-value ratio, a recent borrower, 30-year loan and monthly payments.

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