Why a $250b wave of mortgage pain may be coming

The inflation/rates story is well known; Tuesday’s 0.5 percentage point rise took rates to 1.85 per cent, from just 0.35 per cent in May, and ANZ forecasts rates hitting 3.35 per cent by the end of the year.But Mott also provides some fascinating historical context on how debt has built up, by looking at the past 10 housing cycles to study the potential impact of rising rates on credit growth.

“It is akin to the old saying that, ‘if you have your head in the oven and feet in the freezer, you feel OK, on average’. In banking, it is the tail that matters, the last 5 per cent to 10 per cent of borrowers.”Borrowers at maximum While he concedes the analysis is rough, he estimates that, in total, borrowers who have somewhere between $200 billion and $250 billion in mortgages will face severe stress if the cash rate hits 3 per cent later this year, as expected.“If interest rates continue to rise sharply, and stay around these levels, there will be a ‘fat tail’ of borrowers who will simply not be able to afford to meet their repayments,” Mott says.

This period of mortgage stress would be compounded by the fact that $800 billion of fixed-rate mortgages taken out in the past two years at rock-bottom rates will start to expire over the next 18 months, with borrowers facing steep rises in borrowing costs; on a $1 million mortgage, annual interest payments of $19,000 may shoot above $50,000.Collective provisions stand at a historically low $17.

Little sympathy. The majority of Australians blindly and subserviently let politicians destroy Australia over a virus with a 99.97 percent survival rate. They’ve made their bed, we desperately tried to warn them. Now they can lie in it.

250b!!! Them rooky numbers...

Property Property Latest News, Property Property Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Another rate rise expected to pile on mortgage pain today'This is about a difficult day for Australians with a mortgage.' Treasurer Jim Chalmers says his job is to alleviate some of the inflationary pressures we are seeing in the economy, as experts predict a fourth consecutive rate hike today. 9News MORE: Banks not passing on interest rate increases to savers! Let's name and shame them! ANZ NAB COMBANK STGEORGE during election Jim & Albo kept saying we have a plan. where is the plan? the debt was known to all before the election so this is no excuse. a plan is not saying it will get worse before better - perhaps the gov should start saying it will get worse before it gets even worse! Jimbo… no plan, no idea. In the treasurers own words… we just have to weather it.
Source: 9NewsAUS - 🏆 10. / 72 Read more »

Mortgage borrowers facing $500 monthly hike ahead of RBA's interest rate decisionThe average Aussie mortgage borrower is facing an extra $500 a month hike on their repayments compared to May if interest rates are hiked tomorrow. 9News
Source: 9NewsSyd - 🏆 23. / 51 Read more »

Mortgage borrowers facing $500 monthly hike ahead of RBA's interest rate decisionThe average Aussie mortgage borrower is facing an extra $500 a month hike on their repayments compared to May if interest rates are hiked tomorrow. Fi_Willan This historic rate rise announcement was reported on at 6am Do you think that's the best time to inform most people? Then you've got Fi Willan.. No mention at all of the cause of this economic mess (fiat currency based fractional reserve banking) They want you you misinformed
Source: 9NewsAUS - 🏆 10. / 72 Read more »