The latest interest rate hike here in Australia sets the official interest rate at 7%, which is an 11-year high. Since 2002 interest rates have gone up 2.75%, and it is starting to hit people really hard.
Australia already has a nation wide housing affordability crisis, and this is only adding to the problems. It’s expected that up to 1000 families here in Townsville are expected to default on their home loans. Nation wide that number is expected to be as high as 300,000 for home loan defaults.
This could be only the start of a huge mortgage crisis in Australia this year, with an expected further increase of at least 0.5% at least this year to try to curb inflation here in Australia (ex. grocery bills have increased about 50% since 2000).
When we got our first home loan about 5 and a half years ago we fixed our loan at 5.99%. On this house our current loan was fixed for three years at 6.99%. If we were to re-fix our loan right now and stick with the Bank of Queensland (who we currently use) we would be looking at 8.49%. By the time our current fixed loan ends in September we could be looking at a potential rate of 8.99%! Ouch, that will be quite an increase…
I know that I shouldn’t complain. My parents and Tamara’s parents all lived through the 1980s when housing loan interest rates at 20+ per cent. I heard on a radio show that here in Australia over 35% of the average families wages already goes into their mortgage repayments. The upcoming interest rate hike will increase that percentage even further.
From what I have read there are mixed feeling about how the interest rate hikes will affect house prices. The Townsville Real Estate Market is going gang busters, and has been for a while, but even a place as booming as Townsville is vulnerable to the increases in interest Rates. Only time will tell that I reckon.
- Townsville Bulletin – Families on the Brink
- Yahoo7 – How will another interest rate rise affect the market?