An online mortgage loan comparison service has recently issued the results of a survey, which revealed that most Australians are concerned with making their mortgage repayments on time. This phenomenon, aptly dubbed ‘mortgage stress’ apparently affected some 43 per cent of respondents in the poll, over the past year. As Aussies deal with home loan-related anxieties, they are also looking into alternatives for cutting household expenses, as well as for making some extra money, in order to cover their monthly mortgage rate. Job insecurities, pay cuts, and the rising cost of living are all adding on to the complexity and difficulties of the situation.
Moreover, not only is the average consumer worried over making enough money as to cover their monthly mortgage repayments, but it also seems that voices in the industry are expressing concern over the issue of interest rates. A recently released poll, from one of Australia’s foremost research companies, has revealed that the level of mortgage repayments has increased by more than 100 per cent over the past decade. The research report compared data from the Australian Bureau of Statistics, collected throughout the last ten years, and found that the level of mortgage repayments increased by 105 per cent over the span of time under analysis.
The results of this report seem to go against the grain of the relatively optimistic outlook that the Australian economy had held during the year’s first quarter. Up until March, housing prices had improved, as a possible effect of the rate cuts enforced by the Reserve Bank of Australia, which were for the most part passed on in full by the banks such as Bankwest for instance. Another positive side effect of this measure, which has brought the official cash rate down to its lowest recorded level since the fall of 2009, was a slight increase in popularity for online home loans.
The current report, however, comes as an alarm signal for the long-term perspectives of Australia’s mortgage market – at least according to the representatives of the company that conducted it. They acknowledge the fact that the market is anything but dynamic at the moment, and that repayment levels have been stagnating this year. However, there is no doubt that mortgages have gotten more and more expensive over the past ten years. A 105 per cent increase is far higher than the 54.5 per cent increase in salaries that Aussies have seen over the previous decade, and well beyond the inflation rate of the same period, which stands at 31.4 per cent. In brief, this means that, in order to make a mortgage loan repayment, the average Australian is now shelling out more hard-earned dollars than he/she was ten years ago. Mortgages are costing the country’s population a larger share of their income.
The one aspect that has consistently been cushioning the effects of this staggering increase is the drop in interest rate levels, from March 1993 to March 2013. At the moment, the average interest rate for a home loan in Australia stands at 6.42 per cent. Twenty years ago, it was around 10 per cent, while in the late eighties and very early nineties, it had reached even steeper levels, in excess of 17 per cent. Research company officials say the population has no reason to worry about seeing any major interest rate increases in the near future, given the current interventionist policy of Australia’s central bank. However, there is no telling about smaller interest rate boosts—which might seem minor on the surface, but could prove disastrous for many households. For instance, a 2 per cent variable interest rate increase for a $300,000 mortgage would elevate monthly mortgage costs by some $400, far beyond the spending possibilities of some families.