The Reserve Bank of Australia now fears 800,000 Australians on a fixed mortgage will face a major shock in 2023 when their ultra-low rates expire.
Since May, the RBA has raised the cash rate eight times and economists are expecting another quarter of a percentage point rate rise on February 7 that would take the cash to a new 10-year high of 3.35 per cent.
Borrowers who fixed their mortgages for two years in 2021, when the RBA cash rate was still at a record-low of 0.1 per cent, are most are at risk with many of those fixed loan periods due to expire in 2023.
This would see their monthly mortgage repayments abruptly surge by 50 per cent, or $1,114 for a borrower with an average $600,000 home loan.
The Reserve Bank of Australia now fears 800,000 Australians on a fixed mortgage will face a major shock in 2023 when their ultra-low rates expire (pictured is a Melbourne auction)
Marion Kohler, the RBA’s head of economic analysis department, said ‘back of the envelope calculations’ and ‘the number is somewhere in the high 800,000 that you’d be looking at’.
‘That’s not 800,000 households necessarily, that’s people who have more than one loan facility,’ she told a Senate hearing on Wednesday.
‘Around one third of the housing credit is fixed rate and we think half of that is due to roll off in the coming year.
‘This is quite a difficult question to answer.’
Little more than 18 months ago, in May, 2021, Australia’s banks were offering average fixed rate mortgages of just 1.95 per cent.
But once these fixed rates expire, borrowers would be pushed on to a variable mortgage rate, now at 5.01 per cent among the big banks, RateCity calculations show.
Another rate rise in February would take that to 5.26 per cent.
A borrower with an average $600,000 loan would see their monthly repayments abruptly climb by $1,114 to $3,317 from $2,203.
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